OF  THE 
UNfVERSITX 


&  CO, 


WARWICK,  MITCHELL  &  CO. 


THE    MODERN   TRUST   COMPANY 


THE 


MODERN   TRUST   COMPANY 


ITS  FUNCTIONS  AND  ORGANIZATION 


BY 

FRANKLIN   BUTLER   KIRKBRIDE 

FORMERLY  TREASURER  THE  PENNSYLVANIA  COMPANY  FOR  INSURANCES  ON 

LIVES  AND  GRANTING  ANNUITIES 
(TRUST  AND  SAFE  DEPOSIT  COMPANY) 

AND 

J.   E.   STERRETT,   C.P.A. 

OF  THE  FIRMS  OF  DICKINSON,  WILMOT  &   STERRETT 
AND  PRICE,   WATERHOUSE  &  COMPANY 


Nefo  gorfe 
THE   MACMILLAN   COMPANY 

LONDON  :  MACMILLAN  &  CO.,  LTD. 


All  rights  reserved 


LJ 


COPYRIGHT,  1905,  1908, 
BY  THE  MACMILLAN  COMPANY. 


Set  up  and  electrotyped.    Published  December,  1905.    Reprinted 
March,  1906;  April,  1908. 


Nortoooli  $rrss 

J.  8.  Gushing  Co.  —  Berwick  A  Smith  Co. 
Norwood,  Mass.,  U.S.A. 


/fog 


u  Conservatism  is  really  the  foundation  of  all  good  banking, 
and  it  is  more  especially  so  in  trust  company  operations  than 
in  anything  else.  The  purely  trust  functions  of  the  old- 
fashioned  trust  company  are  undoubtedly  the  highest  develop- 
ment of  the  principle  of  credit  and  of  confidence.  They  are 
the  highest  application  of  that  principle  to  the  relation  of  man 
to  man  in  business." 

HON.  WILLIAM  B.  RIDGELY, 
Comptroller  of  the  Currency,  before  the  Trust  Company 
Section  of  the  American  Bankers'  Association,  September  jj,  1904. 


0671297 


ORGANIZATION  OF  THE  MODERN  TRUST  COMPANY 


President 
Vice-President 
Treasurer 
.Secretary 


Banking 
Department 


Corporate  Trust 
Department 


Individual  Trust 
Department 


Safe  Deposit 
Department 

Savings  Fund 
Department 


Insurance 
Department 


Controller's 
Department 


Receipt  of  Deposits 
Disbursement  of  Deposits 
Record  of  Deposits 
Loans  and  their  Records 
Investments  and  their  Records 
Purchase  and  Sale  of  Securities 
Letters  of  Credit 
Foreign  and  Domestic  Exchange 
Stockholders'  Dividends 
Expense  Account 

Trustee 

Fiscal  Agent 

Registrar 

Transfer  Agent 

Syndicate  Manager 

Depositary 

Assignee 

Receiver 

Agent 

«       Stocks  and  Bonds 
g  d  Mortgages 
H  "^  Real  Estate 
o  g   Receipt  of  Trust  Funds 
|  ^  Payment  of  Trust  Funds 
x       Accounts 

J  Renting  of  Safes 
\  Deposit  of  Valuables 

j"  Receipt  of  Deposits 

j  Disbursement  of  Deposits 

I  Record  of  Deposits 

f  Life  Insurance 

J  Fidelity  Insurance  and  Surety- 
ship 
[  Title  Insurance 

j  General  Books 
I  Examinations 


PREFACE 

To  a  correspondent  asking,  "What  book  or  books  will  best 
give  me  a  working  knowledge  of  trust  company  and  banking 
methods;  particularly  regarding  the  work  of  the  various  depart- 
ments of  the  trust  companies?"  the  New  York  Evening  Post 
recently  replied  that  so  far  as  it  was  aware  no  such  book  had 
been  published. 

A  search  in  library  catalogues  confirms  the  almost  equally 
discouraging  statement  of  the  Chief  Bibliographer  of  the  Library 
of  Congress  that  "  there  is  not  much  literature  on  trust  companies 
appearing  in  separate  book  form."  On  the  other  hand,  much  has 
been  written  about  the  functions,  organization,  and  methods  of 
the  banks. 

The  reason  ,  is  easily  given.  The  development  of  the  "  trust 
company  idea  "  is  a  recent  one,  and  only  within  the  past  twenty 
years  have  these  corporations  become  a  prominent  factor  in  the 
financial  world.  Until  the  organization  of  the  Trust  Company 
Section  of  the  American  Bankers'  Association  in  1896,  the  only 
publications  in  reference  to  trust  companies  were  short  chapters 
in  works  on  banking  and  an  occasional  magazine  article.  Since 
that  time  the  transactions  of  the  Trust  Company  Section  and 
articles  in  banking  periodicals  and  the  financial  press  have  con- 
stituted the  most  important  contributions  to  the  subject;  but  in 
spite  of  all  that  has  been  written  on  special  lines  of  trust  com- 
pany work,  it  is  still  difficult  to  obtain  a  general  knowledge  of 
what  a  trust  company  is  and  how  it  does  its  business. 

The  aim  of  the  present  volume  is  to  describe  the  functions 
and  organization  of  the  trust  company  as  it  exists  in  the  United 
States  to-day.  Its  history,  which  dates  from  the  granting  of  the 


viii  PREFACE 

first  trust  company  charter  in  1822,  has  already  been  told  in  a 
number  of  interesting  papers  and  addresses,  and  is  therefore  not 
repeated.  Practical  experience,  consultation  of  all  available  litera- 
ture, the  examination  of  trust  companies  in  various  parts  of  this 
country,  and  conferences  with  their  officers,  have  helped  to  make 
a  composite  picture.  The  forms  and  systems  described  are  those 
which  have  commended  themselves  to  the  authors'  judgment  as 
best  adapted  to  the  needs  of  the  average  trust  company.  It  does 
not  follow  that  many  others  are  not  equally  good.  The  methods 
outlined  in  the  following  pages,  although  not  complete  in  every 
detail,  are,  it  is  believed,  representative  of  the  best  systems  now 
employed. 

Free  use  has  been  made  of  books  and  papers  on  various 
parts  of  the  subject.  To  the  officers  of  many  trust  companies 
grateful  thanks  are  due  for  uniformly  courteous  treatment  and 
much  appreciated  opportunities  of  studying  their  methods. 

Special  mention  must  also  be  made  of  valuable  help  rendered 
by  Parker  S.  Williams,  Esq.,  of  the  Philadelphia  Bar,  and  by 

Miss  Elizabeth  B.  Kirkbride. 

F.  B.  K. 

J.  E.  S. 

SEPTEMBER  25, 1905. 


PREFACE  TO   THE  THIRD   EDITION 

SINCE  the  first  edition  of  "  The  Modern  Trust  Company  "  was 
published  in  December,  1905,  the  subject  has  been  one  of  ever  in- 
creasing public  interest.  To  this  fact  must  be  attributed  the  general 
circulation  of  so  technical  a  book ;  it  has  even  been  reported  among 
the  "  miscellaneous  books  most  in  demand  "  on  the  shelves  of  a  pub- 
lic library. 

During  this  time  laws  have  been  passed  in  many  states,  tend- 
ing toward  the  proper  control  and  regulation  of  trust  companies. 
Renewed  emphasis  has  been  given  to  the  necessity  for  the  mainte- 
nance of  substantial  cash  reserves  by  all  companies  doing  a  general 
banking  business.  The  relation  of  trust  companies  to  the  clearing 
houses  has  received  a  thoughtful  consideration  which  bids  fair  to 
bring  about  better  understanding  between  the  trust  companies  and 
the  banks. 

In  the  present  edition  all  references  to  laws  and  to  clearing  house 
and  stock  exchange  rules  have  been  brought  up  to  date.  New  titles 
have  also  been  added  to  the  bibliography. 

The  panic  of  1907,  with  its  immediate  demand  for  corporate  vigi- 
lance, has  driven  home  the  conviction  that  sound  banking  principles 
must  be  the  basis  of  success  in  all  trust  company  operations. 

F.  B.  K. 
J.  E.  S. 

NEW  YORK,  February  25,  1908. 


TABLE   OF  CONTENTS 

PACK 

PREFACE vii 

CHAPTER 

I.    FUNCTIONS i 

Introduction I 

Banking 6 

Corporate  Trusts 6 

Individual  Trusts 8 

Care  of  Securities  and  Valuables u 

Life  Insurance,  etc u 

Government  Regulation        ....  n 

II.    ORGANIZING  A  TRUST  COMPANY 14 

Charter  and  Capital 14 

Stockholders 21 

Board  of  Directors 23 

III.  OFFICERS 28 

Introduction          .         . 28 

President 31 

Vice-President 35 

Treasurer .         -36 

Secretary 37 

Manager  of  Corporate  Trust  Department  (Trust  Officer)       .         .  39 

Manager  of  Individual  Trust  Department  (Trust  Officer)      .        .  40 

IV.  BANKING  DEPARTMENT 43 

Organization 43 

Receiving  Teller 44 

Paying  Teller 51 

Clearing  Trust  Company  Checks 57 

Care  of  Deposits 61 

Reserves 74 

xi 


xii  TABLE  OF  CONTENTS 

CHAPTER 

V.    BANKING  DEPARTMENT  (CONTINUED) 77 

Loans  and  their  Records   .        .        .        .        •        .        .        •  77 

Money  Rate 92 

Investments *        •        •  93 

Purchase  and  Sale  of  Securities 98 

Travellers'  Letters  of  Credit 99 

Foreign  and  Domestic  Exchange       .        .        •        •        •        .  101 
Stock  Ledger  and  Stockholders1  Dividends        .        .        .        .104 

Expense  Account 106 

Petty  Cash  Receipts no 

Petty  Cash  Payments         .        .        .     * 1 10 

Payment  of  Salaries 1 1 1 

VI.    CORPORATE  TRUST  DEPARTMENT.        .       .        .        •        •       •  113 

Trustee .        ,       .        .        .  113 

Fiscal  Agent 122 

Registrar 127 

Transfer  Agent 129 

Manager  of  Underwriting  Syndicates 138 

Depositary  under  Plans  of  Reorganization         ....  140 

Assignee  and  Receiver 142 

Agent 144 

Accounts 144 

Compensation .        .        .        .145 

VII.    INDIVIDUAL  TRUST  DEPARTMENT 147 

General  Organization 147 

Appointment 148 

Care  of  Stocks  and  Bonds          .        .        .        .        .        .        .  153 

Index  of  Securities 155 

Arrangement  of  Securities  in  Vault 159 

Collection  of  Interest  and  Dividends          .        .        .        .        .162 

Care  of  Mortgages 166 

Care  of  Real  Estate 173 

Insurance  on  Real  Estate .181 

VIII.    INDIVIDUAL  TRUST  DEPARTMENT  (CONTINUED)    .        .        .        .184 

Receipt  of  Trust  Funds 184 

Disbursement  of  Trust  Funds 185 

Record  of  Individual  Trusts  188 


TABLE  OF   CONTENTS  xiii 

CHAPTER  PAGE 

Individual  Trust  Ledger 198 

Trust  General  Ledger         .        .        .        .        .        .        .        .201 

Investments 204 

Compensation 207 

IX.    SAFE  DEPOSIT  DEPARTMENT         ..«,...  209 

Introduction 209 

Renting  of  Safes 213 

Deposit  of  Valuables 219 

General  Books 222 

X.    SAVINGS  FUND  DEPARTMENT 225 

XI.    LIFE,  FIDELITY  AND  TITLE  INSURANCE,  AND  SURETYSHIP  .        .  230 

XII.    GENERAL  ACCOUNTING 233 

Controller 233 

Company's  General  Ledger 234 

Audits  and  Examinations 243 

XIII.    MISCELLANEOUS  SUBJECTS 249 

Correspondence  or  Mail  Room 249 

Clerical  Force 256 

Messengers,  Watchmen,  and  Cleaners 258 

Office  Building 259 

Luncheon  Room        .........  261 

Purchase  and  Care  of  Supplies 262 

Advertising       «...                 ...                 .  266 

APPENDIX 269 

Trust  Companies  in  the  District  of  Columbia  (National  Bank  Act)       .  269 
New  York  Stock  Exchange,  Requirements  from  Applicants  for  listing 

Stocks  or  Bonds 279 

New  York  Stock  Exchange,  Rules  for  Delivery 287 

BIBLIOGRAPHY 293 

LIST  OF  FORMS 299 

INDEX 303 


THE  MODERN  TRUST  COMPANY 


CHAPTER   I 

FUNCTIONS 
INTRODUCTION 

THE  trust  company  supplements  the  bank.  Through  a  long 
process  of  evolution  the  bank  has  developed  as  a  means  of  facili- 
tating the  exchange  of  commodities.  The  trust  company  is  a  still 
further  step  in  the  same  process,  and,  in  a  highly  organized  society, 
it  meets  needs  which  the  bank  is  not  able  to  supply. 

In  a  new  community  the  general  store  forms  the  centre  of  the 
business  life  of  the  place.  With  growth  and  increasing  trade,  the 
private  banker  sees  room  for  the  profitable  employment  of  his  funds. 
The  state  or  national  bank  meets  the  needs  of  further  growth. 
Success  and  the  accumulation  of  wealth  pave  the  way  for  the  trust 
company.  The  bank  is  organized  primarily  to  serve  the  needs  of 
active  commercial  life;  the  trust  company  handles  funds  in  less 
active  circulation. 

The  national  bank  is  permitted  to  issue  its  notes,  which  become 
part  of  the  currency  of  the  country.  Its  funds  are  largely  employed 
in  making  unsecured  loans  by  discounting  the  notes  of  its  customers. 
Trust  companies,  on  the  other  hand,  are  not  allowed  to  issue  such 
notes,  and  are  in  some  states  prohibited  from  discounting  paper. 
The  banks  are  not  allowed  to  make  loans  secured  by  real  estate, 
while  the  trust  companies  employ  a  considerable  proportion  of  their 
funds  in  this  way.  National  banks  are  not  permitted  to  make  loans 
exceeding  one-tenth  of  their  capital  to  any  individual.  The  more 
liberal  provisions  in  trust  company  charters  have  enabled  these 
institutions  to*  make  larger  advances,  and  so  to  take  part  in  the  devel- 
opment of  the  resources  of  the  country  on  a  larger  scale.  National 
banks,  as  a  rule,  do  not  pay  interest  on  the  accounts  of  individuals  or 

B  I 


2  THE  MODERN  TRUST   COMPANY 

firms,  but  do  extend  credit  to  them.  Trust  companies,  however,  allow 
interest  on  deposits,  and  are  therefore  sought  by  those  who  desire 
some  return  on  idle  funds  but  are  not  in  need  of  unsecured  loans. 

It  is  customary  for  the  courts  to  designate  or  approve  certain 
trust  companies  as  depositories  for  funds  paid  into  court,  and  the 
effect  of  such  designation  or  approval  would  be  to  relieve  executors, 
trustees,  or  others  acting  in  a  fiduciary  capacity  and  depositing  with 
these  companies  from  liability  for  loss  through  their  failure.  A 
person  charged  with  due  care  in  the  selection  of  a  depository  could 
not  be  held  to  have  been  wanting  in  such  care  in  choosing  as  a  de- 
pository a  trust  company  which  the  court  has  itself  approved. 

The  powers  of  trust  companies  vary  in  different  states,  and  when 
they  are  created  by  special  legislation,  local  companies  are  found 
with  different  charter  privileges.  The  capital  and  surplus  of  these 
institutions  are  liable  for  their  acts  in  fiduciary  capacities,  and  in  some 
states  they  are  required  to  deposit  with  one  of  the  state  departments 
a  fund  as  a  special  guarantee.  The  liability  assumed  is  generally 
accepted  by  the  courts  in  lieu  of  the  bonds  which  individuals  acting 
in  similar  capacities  are  required  to  give. 

The  development  of  trust  companies  in  the  United  States  has  been 
remarkably  rapid.  Since  i822,a  when  the  first  legal  authority  was 
given  for  the  exercise  by  corporations  of  fiduciary  powers,  they  have 
steadily  grown  in  number  until  there  are  now  more  than  fourteen 
hundred,  distributed  as  follows :  — 

Alabama  ....  26  Delaware ....  7  Indiana      ....  80 

Arizona     ....  7  District  of  Columbia  6  Indian  Territory .     .  23 

Arkansas  ....  30  Florida     ....  8  Iowa 33 

California      ...  36  Georgia    .     .     .     .  17  Kansas 5 

Colorado  .     .     .     .  12  Idaho 14  Kentucky  ....  43 

Connecticut  ...  26  Illinois      ....  64  Louisiana  .     .    .     .  22 

1  April  17,  1822,  The  Farmers'  Fire  Insurance  &  Loan  Company  of  New  York  (now 
The  Farmers'  Loan  &  Trust  Company),  incorporated  on  February  28,  1822,  was  granted 
trust  powers  by  a  supplement  to  its  charter. 

March  9,  1830,  The  New  York  Life  Insurance  &  Trust  Company  was  chartered. 

February  26,  1836,  The  Pennsylvania  Company  for  Insurances  on  Lives  and  Grant- 
ing Annuities  of  Philadelphia,  incorporated  as  a  life  insurance  company  on  March  10, 
1812,  was  granted  trust  powers  by  a  supplement  to  its  charter. 

March  17,  1836,  The  Girard  Life  Insurance,  Annuity  &  Trust  Company  of  Philadel- 
phia (now  The  Girard  Trust  Company)  was  chartered. 

All  these  companies  are  still  flourishing. 


FUNCTIONS 


Maryland  .  .  . 
Massachusetts  . 
Michigan  .  .  . 
Minnesota  .  . 
Mississippi 

.       20 

.     42 
.      8 

•       5 
28 

New  Mexico  .  .  . 
New  York  .  .  . 
North  Carolina  .  . 
North  Dakota  .  . 
Ohio 

Missouri  .  .  . 
Montana  .  .  . 
Nebraska  .  .  . 
Nevada  .  .  . 
New  Hampshire 

•     39 
.       6 
.       8 

•       7 

.      6 

Oklahoma  .  .  . 
Oregon  .  .  .  . 
Pennsylvania  .  , 
Rhode  Island  .  . 
South  Carolina  .  . 

69  South  Dakota  .  .  8 

6  Tennessee ....  65 

88  Texas 43 

39  Utah 3 

3  Vermont  ....  25 

63  Virginia  .  .  .  .  21 

6  Washington  ...  19 

14  West  Virginia  .  .  20 

.  272  Wisconsin  .  .  .  .  10 

12  Wyoming   ....       5 

21  Hawaii 4 

Total1  .  .  .  1479 


Their  business  in  all  departments  has  shown  a  steady  increase, 
and  the  trust  companies  of  the  United  States  to-day  carry  deposits 
amounting  to  over  $3,246,8oo,ooo.1  Net  deposits  in  the  6544  na- 
tional banks  aggregate  $5,256,o85,ooo.2 

In  some  states  commercial  banking  and  trust  powers  are  exercised 
by  the  same  companies.  In  such  cases,  separate  departments  are 
maintained  for  the  various  classes  of  business.  Another  method 
is  for  the  same  individuals  to  organize  a  national  bank  and  a  trust 
company,  the  former  under  national  and  the  latter  under  state  laws. 
The  practice  in  Illinois  of  allowing  a  banking  company  to  qualify 
under  the  law  granting  trust  powers,  is  based  on  a  sounder  principle 
than  the  close  relation  between  institutions  acting  under  separate 
charters,  amenable  to  different  laws,  but  controlled  by  identical 
interests. 

The  earning  power  of  trust  companies  has  equalled  and  even  ex- 
ceeded that  of  the  banks,  and  the  stock  of  those  companies  which 
are  well  established  and  doing  a  flourishing  business  sells  at  such  a 
premium  that  investment  in  it  at  its  market  value  gives  a  very  low 
return. 

Trust  company  failures  have  been  few  and  far  between,  and 
where  they  have  occurred  they  can  be  traced  to  a  disregard  of  sound 
banking  principles  and  to  the  assumption  of  unwarranted  risks. 
Even  in  the  case  of  companies  which  have  failed  there  is  no  record 


1  June  29,   1907.     Compiled  from  "Trust  Companies  of  the  United  States,"  pub- 
lished by  the  United  States  Mortgage  &  Trust  Company,  New  York. 

2  August  22,  1907.     Report  of  the  Comptroller  of  the  Currency,  1907. 


4  THE  MODERN   TRUST   COMPANY 

of  any  impairment  of  trust  funds,  whatever  loss  there  was  having 
been  borne  by  the  stockholders  and,  to  a  less  degree,  by  the  depositors. 
This  fact,  the  result  of  the  absolute  separation  of  trust  assets  from 
assets  belonging  to  the  company,  is  the  strongest  argument  for  the 
employment  of  trust  companies  in  fiduciary  capacities,  and  explains 
their  rapid  growth  in  popular  favor. 

The  literature  put  out  by  these  institutions  invariably  recites  the 
advantages  to  be  gained  by  dealing  with  them  instead  of  with  indi- 
viduals. The  following  is  a  good  example  of  such  reasoning :  — 

"THE  ADVANTAGES  OF  A  TRUST  COMPANY  AS  TRUSTEE 

"  A  trust  company  is  preferable  to  individual  trustees,  because  it  possesses 
every  quality  of  desirability  which  the  individual  lacks,  to  wit :  — 

(1)  Its  permanency;  it  does  not  die. 

(2)  It  does  not  go  abroad. 

(3)  It  does  not  become  insane. 

(4)  It  does  not  imperil  the  trust  by  failure  or  dishonesty. 

(5)  Its  experience  and  judgment  in  trust  matters  are  beyond  dispute. 

(6)  It  never  neglects  its  work  or  hands  it  over  to  untrustworthy  people. 

(7)  It  does  not  refuse  to  act  from  caprice  or  on  the  ground  of  inexperience. 

(8)  It  is  invariably  on  hand  during  business  hours  and  can  be  consulted  at 

all  times. 

(9)  Its  wide  experience  of  trust  business  and  trust  securities  is  invaluable 

to  the  estate. 

(10)  It  is  absolutely  confidential. 

(n)  It  has  no  sympathies  or  antipathies  and  no  politics. 

(12)  It  can  be  relied  upon  to  act  up  to  its  instructions. 

(13)  It  does  not  resign. 

(14)  All  new  investments  of  value  suitable  for  trust  estates  are  offered  in 

the  first  instance  to  trust  companies,  and  in  that  way  it  has  a  choice 
of  valuable  security ;  and  as  its  purchases  are  on  a  scale  of  magnitude, 
it  can  usually  buy  at  a  rate  which  is  lower  than  that  at  which  the 
individual  trustee  can  purchase." 

The  most  common  objection  to  the  appointment  of  corporate 
trustees  is  thus  stated  by  Augustus  Peabody  Loring,  Esq. : * 

"  The  trust  companies,  which  have  of  late  years  become  so  numerous,  to  a 
considerable  extent  do  away  with  the  element  of  personal  risk  attaching  to  an  in- 
dividual trustee ;  but  they  lack  the  advantages  of  personal  management.  These 
companies  sometimes  fail  from  improper  management  as  utterly  as  individuals  do, 

l  "  A  Trustee's  Handbook,"  p.  15. 


FUNCTIONS  5 

and  as  a  rule  the  lack  of  personal  management  results  in  securing  the  minimum 
return  only  on  the  amount  invested,  and  lacks  the  great  advantages  often  secured 
by  the  able  personal  oversight  of  individual  trustees." 

Thomas  Learning,  Esq.,  viewing  the  matter  from  the  standpoint 
of  the  beneficiary,  says,  "No  doubt  there  are  some  objectionable  fea- 
tures in  having  for  a  trustee  a  corporation,  which  has  neither  a  body 
to  be  kicked  nor  a  soul  to  be  damned."  * 

The  question,  after  all,  comes  back  to  the  personal  qualifications 
of  corporate  officers  and  individuals.  If  the  former  are  less  capable 
than  the  latter,  the  fault  is  with  the  particular  company,  —  not  the 
system,  and  if  interest  returns  are  sometimes  less  under  corporate 
management,  this  fact  is  more  than  equalized  by  the  added  safety  to 
the  corpus  of  the  estate. 

A  " Trustee  Company"  has  been  suggested  as  a  proper  title  for 
the  company  doing  a  legitimate  trust  business,  and  is  the  name  used 
in  Australia  and  in  New  Zealand.  In  some  states  the  use  of  the  word 
" trust"  in  corporate  titles  is  now  regulated  by  law.  Confusion  has 
arisen  in  the  popular  mind  between  the  trust  company  and  the  trusts 
or  industrial  combinations.  In  quite  a  different  connection  the  words 
"guarantee,  loan,  and  trust"  have  been  used  to  attract  the  unwary, 
who  might  not  have-  been  misled  had  they  understood  the  nature  of 
such  "collateral  banks,"  still  better  known  by  the  pawnbroker's 
emblem. 

The  usual  functions  of  a  trust  company  are:  banking  in  a  more 
or  less  limited  form,  execution  of  corporate  trusts,  execution  of  indi- 
vidual trusts,  care  of  securities  and  valuables.  In  addition,  other 
functions  are  sometimes  exercised,  such  as  life,  title,  and  fidelity 
insurance,  and  the  business  of  becoming  surety.  The  earlier  com- 
panies in  the  United  States  were  chartered  to  manage  individual 
estates  only  and  to  act  in  certain  fiduciary  capacities;  the  recent 
development  of  the  trust  company  has  been  in  the  direction  of  bank- 
ing functions  and  corporate  trust  business. 

It  is  worthy  of  note  that  the  life  insurance  companies  which  origi- 
nally secured  trust  powers  have,  with  but  few  exceptions,  given  up  their 
life  insurance  business,  and  that  most  of  the  fidelity  insurance  and 
surety  business  is  given  over  to  companies  which  now  make  a  spe- 
cialty of  such  risks.  In  the  same  way,  many  title  insurance  companies 

1 "  Trust  and  Title  Insurance  Companies,"  Lippincotfs  Magazine,  Vol.  XLII,  p.  887. 


6  THE  MODERN   TRUST  COMPANY 

transact  a  banking  and  trust  business  but  tend  to  confine  themselves 
more  and  more  to  title  insurance.  In  other  words,  the  fact  is  being 
recognized  that  the  assumption  of  vast  risks  contingent  on  future 
occurrences  is  not  compatible  with  the  absolute  security  which  is 
essential  in  the  transaction  of  legitimate  trust  business. 

BANKING 

The  banking  functions  of  trust  companies  may  include  any  or  all 
of  the  following :  — 

The  receipt  of  money  deposits  payable  on  demand  and  subject  to 
check,  or  payable  at  a  fixed  date,  or  according  to  special  agreement. 
Interest  is  usually  allowed  on  all  deposits  above  a  fixed  minimum 
amount  or  on  the  total  sum. 

Money  advances  secured  by  the  hypothecation  of  stocks,  bonds, 
life  insurance  policies,  bonds  and  mortgages,  or  other  personal  prop- 
erty. 

Real  estate  loans,  secured  by  bond  and  mortgage.  It  is  customary 
to  loan  not  over  two-thirds  of  the  value  of  improved  property  ;  when 
the  property  is  unimproved,  not  more  than  half. 

Discounting  paper  is  engaged  in  principally  by  companies  trans- 
acting a  commercial  banking  business.  The  purchase  of  unsecured 
paper  is  permitted  in  some  states  where  discounting  is  not  allowed. 

The  purchase  and  sale  of  securities. 

Trust  companies  sometimes  guarantee  issues  of  bonds,  or  at  least 
set  their  stamp  of  approval  upon  them. 

The  issue  or  guarantee  of  letters  of  credit,  and  the  transaction  of 
a  foreign  exchange  business. 

The  care  of  savings  deposits.  For  this  purpose  a  separate  depart- 
ment is  usually  maintained. 

CORPORATE  TRUSTS 

Among  the  most  important  functions  of  a  trust  company  are  those 
relative  to  the  business  of  other  corporations. 

"  Of  late  years  the  trust  companies  in  the  Eastern  cities  have  been  selected 
as  trustees  instead  of  individuals  whenever  the  law  of  the  State  where  the  prop- 
erty was  situated  allowed  such  selection.  Trust  companies  have  manifold  advan- 
tages over  individuals  in  such  a  relationship ;  they  do  not  die ;  the  large  amount 


FUNCTIONS  7 

of  financial  business  which  they  daily  transact  provides  them  with  the  machinery 
for  such  purposes ;  while  their  well-known  names  stand  as  evidence  to  the  pur- 
chasing public  that  at  least  the  necessary  formalities  have  been  complied  with. 
Beyond  that  responsibility  the  trustees  of  corporation  mortgages  usually  assume 
none. 

"In  recent  years  the  trust  companies  have  shown  a  tendency,  when  acting  as 
mortgage  trustees,  to  recognize  a  greater  moral  responsibility  than  they  at  first 
were  willing  to  bear.  Trust  companies  did  not,  of  course,  intend  to  appear  as 
in  any  way  guaranteeing  the  bonds  to  which  they  certified,  though  that  seems 
often  to  have  been  the  erroneous  opinion  of  the  unthinking ;  but  trustees  now 
acknowledge  themselves  bound  within  the  limits  of  the  mortgage  to  use  their 
influence  to  protect  the  interests  of  the  bondholders.  A  trust  company  which 
should  now  allow  the  issue  of  unsecured  bonds  because  of  some  glaring  defect  in 
the  language  of  the  mortgage,  would  not  longer  be  morally  excused  by  financial 
opinion,  though  perhaps  held  technically  innocent. 

"  One  way  in  which  this  sentiment  attributing  some  sort  of  ethical  responsi- 
bility to  trustees  of  corporation  mortgages  manifests  itself  is  through  slight  altera- 
tions in  the  wording  of  the  mortgage  itself.  The  old  language  was  that  the 
trustee  was  to  be  held  harmless  under  all  circumstances.  Now  the  trustee  is 
often  found  willing  to  assume  responsibility  at  least  for  gross  negligence  of 
servants  or  clerks  not  carefully  selected.  If  to  some  such  phrase  be  added 
a  more  careful  drawing  of  the  mortgage  as  to  its  provisions  against  unauthorized 
issues  of  bonds,  a  better  compliance  with  the  ethics  of  the  situation  would  be  had  ; 
for  it  is  undeniable  that  a  part  of  the  public  complaint  against  the  fraudulent  issue 
of  bonds  should  be  directed  against  the  inadequate  safeguards  imposed  in  the 
mortgage  rather  than  against  the  trustee."  x 

As  trustee  under  corporate  mortgages  and  trust  deeds,  the  trust 
company  acts  for  the  bondholders.  It  is  customary  for  it  to  authenti- 
cate each  bond  issued  subject  to  the  provisions  of  the  mortgage,  to 
represent  the  bondholders  in  case  of  default,  and  to  exercise  such 
other  functions  as  may  be  provided  in  the  mortgage. 

As  fiscal  agent  it  dispenses  coupon  and  interest  payments  on  bond 
issues,  and  dividends  on  stock.  It  receives  sums  set  aside  as  sinking 
funds  to  provide  for  the  retirement  of  obligations  at  maturity,  or  when 
bonds  are  subject  to  redemption,  draws  the  specified  amount  by  lot 
and  pays  the  principal. 

As  registrar  the  trust  company  authenticates  certificates  of  stock 
and  bonds  in  order  to  prevent  an  over-issue,  and  to  reduce  the  chance 
of  loss  or  theft.  ^ 

As  transfer  agent,  the  company  attends  to  perfecting  transfers  of 
ownership  for  stock  and  bond  issues  or  parts  thereof. 

1 "  Corporation  Finance,"  Thomas  L.  Greene,  p.  59. 


8  THE  MODERN   TRUST  COMPANY 

As  manager  of  underwriting  syndicates,  the  trust  company  issues 
the  prospectus  and  markets  the  securities  of  corporations  which  are 
being  launched,  or  of  established  companies  which  are  putting  out 
new  securities. 

In  railroad  and  other  reorganizations,  the  trust  company  takes  a 
prominent  part,  acting  both  as  a  depositary  for,  and  as  a  representa- 
tive of,  the  committees  which  formulate  and  execute  the  plans  of 
reorganization.  Its  officers  often  have  a  large  share  in  the  prepara- 
tion of  such  plans. 

As  assignee  and  receiver,  the  trust  company  acts  in  the  same 
capacity  for  corporations  as  for  individuals  and  firms  or  partner- 
ships, assisting  in  winding  up  insolvent  businesses  and  in  conduct- 
ing embarrassed  ones. 

INDIVIDUAL  TRUSTS 

The  execution  of  individual  trusts  is  the  function  originally  as- 
sumed by  trust  companies.  The  various  other  forms  of  business 
which  are  now  engaged  in,  have,  with  the  exception  of  life  insurance, 
been  later  developments  of  the  trust  company  idea.  The  earliest 
power  granted  these  companies  was  to  receive  moneys  or  other  prop- 
erty, real  or  personal,  in  trust.  The  trust  company  now  also  acts  as 
executor  and  administrator  of  the  estates  of  decedents. 

As  executor  appointed  by  the  will  of  a  decedent,  it  takes  out  letters 
testamentary  upon  probate  of  the  will,  advertises,  files  inventory  and 
appraisement,  pays  debts,  collects  claims,  makes  the  requisite  account- 
ing to  the  probate  or  orphans'  court,  and  makes  distribution  of  the 
estate  in  accordance  with  the  terms  of  the  will  and  the  court's  decree. 

As  administrator  acting  under  appointment  of  the  register  of  wills 
or  probate  court,  it  performs  similar  duties,  distributing  the  estate 
in  accordance  with  decedent's  will  if  there  is  one,  or  if  there  is  none, 
in  accordance  with  the  intestate  laws  of  the  state,  which  specify  the 
order  of  succession  and  distributive  shares  in  the  case  of  estates  of 
decedents  leaving  no  wills.  There  are  different  kinds  of  adminis- 
trators, in  any  of  which  capacities  a  trust  company  may  be  called 
upon  to  act.  In  Pennsylvania,  for  example,  there  may  be  (a)  a 
general  administrator,  when  there  is  no  will;  (b)  an  administrator 
cum  testamento  annexo,  when  decedent  has  left  a  will  without  nam- 
ing an  executor  or  the  executor  named  refuses  to  act  or  has  died; 


FUNCTIONS  9 

(c)  an  administrator  de  bonis  non  when  the  first  administrator  has 
died  or  has  been  discharged  before  the  estate  has  been  fully  ad- 
ministered and  his  successor  is  appointed  to  complete  his  work  [this 
may  occur  in  both  cases  (a)  and  (b) ;  if  it  occurs  where  there  is  a  will, 
the  new  administrator  is  called  administrator  de  bonis  non  cum  testa- 
mento  annexo]\  (d)  an  administrator  pendente  lite,  when  appointed 
to  take  charge  of  an  estate  pending  litigation  on  the  will  of  the  dece- 
dent ;  (e)  an  administrator  durante  minoritate,  when  appointed  to  act 
during  the  minority  of  an  executor;  (/)  an  administrator  appointed 
under  ancillary  letters  to  act  in  a  particular  state  when  other  letters 
have  been  issued  elsewhere. 

As  trustee  under  will,  the  trust  company  carries  out  the  provisions 
of  the  will,  investing  and  managing  the  estate  or  particular  fund  in 
accordance  with  the  directions  of  the  testator.  As  such  it  may  hold 
real  and  personal  property. 

As  trustee  under  deed  or  private  agreement,  a  contract  is  entered 
into  between  the  company  and  the  owner  of  the  property,  by  which 
the  title  to  the  property  is  vested  in  the  corporation  subject  to  the 
terms  recited  in  the  instrument.  Such  deeds  of  trust  may  be  revo- 
cable or  irrevocable.  Marriage  settlements  are  frequently  made  in 
this  way. 

Accounting  to  the  probate  or  other  proper  court  by  testamentary 
trustees  is  generally  regulated  by  law.  Accounting  by  trustees  under 
deed  is  usually  regulated  to  some  extent  at  least  by  the  provisions  of 
the  instrument  creating  the  trust. 

The  trust  company  acts  as  guardian,  curator,  or  committee  of 
the  estates,  and  in  some  states,  of  the  persons  of  minors,  those  who 
are  insane  or  mentally  incompetent,  spendthrifts,  drunkards,  and 
any  other  persons  not  legally  qualified  to  take  charge  of  their  own 
affairs.  In  the  case  of  a  minor,  the  trust  terminates  on  the  ward's 
becoming  of  age;  in  other  cases,  when  the  disability  is  removed,  or 
in  accordance  with  a  decree  of  court.  These  appointments  are 
frequently  made  by  order  of  court,  and  to  it  accounting  must  be 
made.  In  some  states  the  company  is  styled  "conservator"  when 
caring  for  the  estates  of  persons  of  unsound  mind. 

When  acting  as  attorney  in  fact,  the  company  obtains  its  authority 
by  virtue  of  a  letter  of  attorney  which  usually  is  or  can  be  recorded, 
conveying  certain  definitely  specified  powers.  This  may  either  be  to 


10  THE  MODERN  TRUST  COMPANY 

perform  a  single  act — such  as  to  satisfy  a  mortgage — or  may  be 
broader  and  continuing,  granting  authority  to  sell  and  transfer 
securities  and  collect  income.  A  general  power  of  attorney,  as  the 
term  indicates,  is  a  delegation  to  another  of  the  general  powers  of  the 
person  appointing  —  as  to  payments,  collections,  transfers  of  property, 
and  all  transactions  of  a  business  nature. 

As  agent  merely,  the  company  takes  charge  of  property,  real  or 
personal,  for  its  owner,  but  such  agency  does  not  imply  nor  ordinarily 
include  authority  to  sell  or  convey  title. 

As  assignee  the  trust  company  takes  possession  of  the  property 
assigned  for  the  purpose  of  carrying  out  the  terms  of  the  deed  of 
assignment  in  the  interest  both  of  the  assignor  and  the  creditors  of 
the  assignor.  The  deed  of  assignment  is  an  acknowledgment  of  an 
embarrassed  or  insolvent  condition,  and  the  efforts  of  the  assignee  are 
directed  to  realizing  as  much  as  possible  from  the  assets  intrusted  to 
its  management. 

As  receiver,  the  duties  may  be  very  similar  to  those  of  assignee, 
although  they  are  usually  broader  in  scope.  The  business  may  not 
be  insolvent,  and  the  application  for  the  appointment  of  a  receiver 
may  be  due  to  temporary  difficulties  only.  By  such  an  appointment 
the  property  is  preserved  intact  and  equal  treatment  is  afforded  cred- 
itors. An  able  receivership  often  results  in  the  adjustment  of  diffi- 
culties and  the  return  of  the  property  to  its  owners  on  a  paying 
basis.  While  in  the  case  of  assignee  the  appointment  is  by  the  indi- 
vidual, partnership,  or  corporation  executing  the  deed  of  assignment 
which  specifies  the  powers  and  duties  of  the  assignee,  in  the  case  of 
receiver  the  appointment  is  by  a  court  and  the  company  so  appointed 
acts  as  an  appointee  or  ministerial  officer  of  the  court,  and  as  such 
is  directly  subject  to  the  court's  orders. 

As  custodian  or  depositary,  the  trust  company  sometimes  holds 
property  the  title  to  which  is  in  dispute,  delivering  the  same  when 
the  ownership  is  legally  determined. 

In  taking  charge  of  escrows  or  conditional  instruments  or  deeds 
delivered  to  a  third  party  until  the  condition  is  performed,  the  trust 
company  acts  in  a  similar  capacity,  as  the  joint  representative  of 
both  parties. 

The  trust  company  acts  as  the  representative  of  both  the  living 
and  the  dead  in  practically  every  legal  relation  in  which  an  individual 


FUNCTIONS  II 

is  qualified  to  act.  Its  function  is  not  only  to  keep  intact  the  estate 
of  which  it  has  charge,  but  to  look  to  and  safeguard  the  interest  of 
every  beneficiary. 

CARE  OF  SECURITIES  AND   VALUABLES 

The  functions  already  recited  have  resulted  in  the  assumption  of 
the  duty  of  caring  for  property  other  than  that  of  the  estates  held  in 
the  trust  department.  In  the  safe  deposit  department,  individual 
safes  are  rented,  bulky  packages  —  not  containing  stocks  or  bonds 
—  are  received  on  storage,  certificates  of  deposit  covering  securities 
are  issued,  and  provision  is  made  for  access  to,  and  examination  of, 
the  property  so  deposited.  For  personal  property  received  on  stor- 
age, the  charges  are  either  according  to  bulk  or  value.  Wills  are 
usually  receipted  for  and  kept  without  charge. 

LIFE   INSURANCE,  ETC. 

Issuing  life  insurance  policies,  and  granting  annuities  payable 
during  the  life  of  the  beneficiary,  were  formerly  important  trust 
company  functions,  now  usually  delegated  to  companies  making  a 
specialty  of  such  business. 

The  examination  and  insurance  of  real  estate  titles  is  a  later  de- 
velopment often  found  in  connection  with  the  usual  trust  functions. 

Fidelity  insurance  and  suretyship  providing  against  loss  by  reason 
of  the  dishonesty  of  individuals  and  the  non-performance  of  obliga- 
tions, contracts,  etc.,  have  often  been  combined  with  the  various  forms 
of  trust  company  activity.  They  are,  however,  largely  passing  into 
the  hands  of  corporations  especially  organized  for  the  transaction 
of  such  business. 

GOVERNMENT  REGULATION 

Hon.  William  Barret  Ridgely,  Comptroller  of  the  Currency,  in  a 
recent  address,1  while  discussing  the  tendency  of  banking  corporations 
under  state  control  to  increase  more  rapidly  than  national  banks, 
said: — 

u  Probably  the  principal  reason  for  this  tendency  is  the  great  increase  in  the 
number  of  trust  companies  which  have  been  organized  during  the  last  ten  years. 

1  "Annals  of  the  American  Academy  of  Political  and  Social  Science,"  Vol.  XXIV, 
p.  23. 


12  THE  MODERN  TRUST   COMPANY 

These  companies,  organized  under  State  laws  originally  designed  to  provide  for 
companies  doing  a  strictly  trust  business,  are  taking  advantage  of  the  liberal  char- 
acter of  those  laws,  and  a  very  large  portion  of  the  new  organizations  are  merely 
commercial  banks,  having  trust  company  privileges  perhaps,  but  in  reality  doing 
comparatively  little  strictly  trust  company  business.  The  laws  of  the  different 
States,  particularly  in  regard  to  the  cash  reserves  to  be  held,  and  loaning  money 
on  real  estate  security,  are  so  liberal  that  organizations  of  this  character  have  a 
great  advantage  over  the  national  banks  in  the  inducements  which  they  can  offer 
their  customers.  It  is  naturally  to  be  supposed  that  any  one  contemplating  the 
organization  of  a  new  bank,  other  things  being  equal,  will  be  inclined  to  do  so 
under  the  laws  which  allow  the  greatest  freedom  from  governmental  interference, 
restriction  and  control." 

An  examination  of  the  laws  of  the  various  states  is  interesting  as 
showing  the  attempts  which  are  being  made  at  regulation.  Most  of 
these  laws  have  been  enacted  within  recent  years  and  to-day  there  are 
but  few  states  which  do  not  have  such  statutes  on  their  books. 

The  step  which  Massachusetts  first  took  in  requiring  a  legal 
reserve  to  secure  deposits  has  been  followed  by  similar  action  in 
other  states.  In  general,  the  wisdom  of  prohibiting  companies  which 
engage  in  the  care  of  estates  from  assuming  excessive  risks  is  becom- 
ing better  recognized.  The  promotion  and  underwriting  of  commer- 
cial ventures  and  the  assumption  of  unknown  risks  are  functions  not 
compatible  with  the  proper  exercise  of  the  duties  of  trustee  or  executor. 

Hon.  Frederick  D.  Kilburn,  State  Superintendent  of  Banks  of 
New  York,1  recently  said :  — 

"This  (state)  control  should  be  sufficiently  comprehensive  to  regulate  the 
organization,  provide  ample  supervision,  and  restrict  investment,  in  a  way  that 
will  conserve,  in  so  far  as  human  ingenuity  can  provide,  the  interests  of  the  public. 
Investment  by  such  institutions,  in  untried  securities,  promotion  of  questionable 
enterprises,  speculative  underwriting  of  stock  or  bonds,  and  all  other  acts  of  a 
nature  involving  dangerous  investment  or  promotion  of  individual  interests, 
should  not  only  be  prohibited,  but  made  a  penal  offence  if  indulged  in  contrary 
to  law." 

Such  views  are  held  by  many  people  who  see  with  concern  the 
assumption  by  trust  companies  of  functions  and  risks  which  were 
never  dreamed  of  by  those  who  framed  the  laws  under  which  they 
act. 

The  supervision  of  trust  companies  by  the  separate  states  provides 
an  elastic  system  to  supplement  the  rigidly  guarded  powers  of  the 

1 "  Annals  of  the  American  Academy  of  Political  and  Social  Science,"  Vol.  XXIV,  p.  42. 


FUNCTIONS  13 

national  banks,  and  can  adapt  itself  to  changing  conditions  and 
enlarging  needs,  leaving  for  solution  according  to  the  requirements 
of  each  section  of  the  country  such  questions  as  proper  functions, 
reserves,  and  the  authority  to  establish  branch  offices.  Excessive 
restrictions  and  petty  interference  by  state  officials  or  the  enactment 
of  unwise  laws  by  the  several  states  might  lead  to  a  change  in 
national  legislation,  permitting  trust  companies  to  incorporate  under 
federal  laws,  as  suggested  by  the  Secretary  of  the  Treasury  in  a 
recent  report.1  Mr.  Shaw  says :  — 

"  I  suggest  the  propriety,  therefore,  of  a  law  giving  trust  companies  of  large 
capitalization  in  large  cities  the  privilege  of  incorporating  under  Federal  law,  with 
corresponding  supervision.  If  such  right  were  extended,  the  more  conservative 
would  probably  avail  themselves  thereof,  and  this  would  compel  others  to  cultivate 
conservatism.  It  would  not  be  necessary  to  extend  to  them  the  distinctive  pre- 
rogatives of  national  banks  beyond  the  capacity  of  being  designated  financial 
agents  of  the  Government,  thereby  justifying  Federal  jurisdiction ;  nor  should 
they  be  brought  into  competition  with  commercial  banks,  but  they  should  be  re- 
quired to  keep  an  appropriate,  though  relatively  small,  reserve  within  their  own 
vaults,  lest  in  times  of  financial  distress  their  large  deposits  with  national  banks 
increase  rather  than  diminish  the  evils  of  financial  panics." 

Such  permissive  legislation  would  doubtless  prove  a  salutary  check 
to  hostile  action  by  state  lawmakers.  National  legislation  now  pro- 
vides for  the  incorporation  and  regulation  of  trust  companies  in  the 
District  of  Columbia.2 

In  New  Zealand  the  creation  of  the  Public  Trust  Office  and  the 
consequent  assumption  by  the  state  of  the  functions  of  executor, 
administrator,  and  trustee,  indicate  a  more  radical  line  of  develop- 
ment in  government  regulation,3  but  one  which  is  not  likely  to  be 
imitated  in  the  United  States. 

Great  Britain  has  followed  the  example  of  New  Zealand  by  the 
passage  of  the  Public  Trustee  Act  of  1906 4  which  became  operative 
on  January  i,  1908.  The  act  applies  to  England  and  Wales,  but 
does  not  extend  to  Ireland  or  Scotland. 

1  "  Annual  Report  of  the  Secretary  of  the  Treasury,"  for  the  fiscal  year  ended  June  30, 
1904,  p.  48. 

2  See  Appendix,  p.  269. 

8  "  Trustee  Companies,"  Robert  C.  Nesbitt,  London. 
4  Public  Trustee  Act,  1906  (6  Edw.  7,  Ch.  55). 


CHAPTER   II 

ORGANIZING  A  TRUST  COMPANY 
CHARTER  AND  CAPITAL 

TRUST  companies  are  organized  under  special  acts  of  legislature, 
or  under  general  corporation  laws  of  the  various  states.  Most  of 
the  older  companies  were  organized  under  special  acts,  and  as  their 
business  grew  and  developed,  further  special  acts  of  legislature,  in 
the  form  of  supplements  to  the  original  charter,  granted  them  addi- 
tional powers  to  provide  for  altered  conditions. 

Although  there  is  still  no  uniformity  of  practice,  in  many  of  the 
states  trust  companies  are  organized  under  general  corporation  laws. 
In  the  states  where  no  such  laws  exist,  trust  companies  are  still  in- 
corporated by  special  act  of  legislature ;  and  in  a  few  states  there  is  a 
choice  of  either  method. 

Owing  to  the  wide  powers  of  trust  companies,  these  organizations 
often  prove  profitable  where  a  state  or  national  bank  could  not  suc- 
ceed. Before  organization  is  decided  upon,  the  promoters  of  a  com- 
pany should  satisfy  themselves  that  enough  business  can  be  secured 
to  make  the  institution  a  success.  In  eras  of  great  commercial 
prosperity,  the  possibilities  of  securing  profitable  business  in  dull 
times  should  be  carefully  weighed.  The  amount  of  capital  having 
been  fixed,  a  preliminary  organization  is  effected  and  the  necessary 
legal  formalities  are  complied  with.  These  formalities  vary  so  much 
in  the  different  states  that  it  is  impossible  to  give  a  general  description 
of  the  process.  The  main  features  of  the  law  in  New  York,  Pennsyl- 
vania, Massachusetts,  and  Illinois  will  here  be  referred  to,  as  in 
these  states  the  trust  company  idea  has  found  its  fullest  development. 

The  general  trust  company  law  of  New  York  provides  that  thir- 
teen or  more  persons  may  form  such  a  company.  They  are  required 
to  execute  under  seal  and  acknowledge  an  organization  certificate  in 

14 


ORGANIZING  A  TRUST  COMPANY  15 

duplicate,  setting  forth  the  name,  location,  amount  of  capital  and 
number  of  shares,  name  and  residence  of  each  member  and  the  term 
of  existence,  not  exceeding  fifty  years,  together  with  a  declaration  that 
each  member  of  the  corporation  will  accept  the  responsibility  and 
faithfully  discharge  the  duties  of  a  director  therein  if  elected.  The 
minimum  capital  required  varies  from  $100,000  in  cities  or  towns 
having  a  population  of  not  over  25,000,  to  $500,000  in  cities  and  towns 
having  a  population  of  over  250,000.  Notice  of  intention  to  organize 
must  be  advertised  for  four  weeks  and  a  copy  sent  to  every  other 
trust  company  doing  business  in  the  same  city,  at  least  fifteen  days 
before  filing  the  certificate.  Proof  that  this  requirement  has  been 
complied  with  must  be  filed,  together  with  one  of  the  organization 
certificates,  with  the  state  superintendent  of  banks,  the  other  organi- 
zation certificate  being  filed  with  the  clerk  of  the  county  in  which 
the  company  proposes  to  do  business,  within  sixty  days  after  being 
acknowledged  by  the  incorporators.  The  state  superintendent  of 
banks  has  full  authority  to  refuse  to  authorize  such  a  company  to 
organize  or  commence  business  if  in  his  judgment  the  new  organiza- 
tion is  not  needed,  or  if  those  named  in  the  certificate  are  not  in  his 
judgment  fit  persons  to  conduct  such  a  business  or  to  command 
the  confidence  of  the  community.  This  authority  is  apparently  not 
a  dead  letter,  but  seems  frequently  to  have  been  exercised.  When  the 
superintendent  is  satisfied  that  the  form  of  the  certificate  is  correct, 
and  that  all  statutory  requirements  have  been  complied  with,  includ- 
ing the  full  payment  in  cash  of  the  capital,  a  certificate  is  issued  by 
him,  authorizing  the  company  to  commence  business,  which  certifi- 
cate is  filed  with  and  recorded  by  the  county  clerk  together  with  the 
original  certificate  of  organization  previously  filed  with  him.  Before 
active  business  may  be  entered  upon,  a  list  of  the  stockholders  with 
their  addresses  must  be  filed  with  the  superintendent  of  banks. 

In  Pennsylvania,  the  older  trust  companies  were  all  incorporated 
by  special  acts  of  legislature.  New  organizations  are  chartered  under 
the  general  corporation  laws  of  the  state.  The  older  companies,  by 
accepting  the  provisions  of  the  general  corporation  laws,  are  per- 
mitted to  take  advantage  of  the  various  powers  conferred  by  these 
statutes.  Under  the  general  corporation  act  and  its  supplements 
a  company  may  be  formed  by  the  voluntary  association  of  three  or 
more  persons.  The  charter  or  articles  of  incorporation  must  be  sub- 


16  THE  MODERN   TRUST  COMPANY 

scribed  by  two  or  more  persons,  at  least  one  of  whom  must  be  a  citi- 
zen of  Pennsylvania.  This  document  must  set  forth  the  name  of  the 
corporation,  the  purpose  for  which  it  is  formed,  the  place  where  its 
business  is  to  be  transacted,  the  term  for  which  it  is  to  exist,  the 
names  and  residences  of  the  subscribers  and  the  number  of  shares 
subscribed  by  each,  the  number  of  the  directors  and  the  names  and 
residences  of  those  who  are  chosen  for  the  first  year;  also  the  amount 
of  capital  stock  and  the  number  and  par  value  of  the  shares.  It  must 
further  set  forth  that  ten  per  cent  of  the  capital  stock  has  been 
paid  in  cash  to  the  treasurer  of  the  intended  corporation,  and  also 
state  the  name  and  address  of  such  treasurer.  It  must  be  acknowl- 
edged before  the  recorder  of  deeds  of  the  county  in  which  its  chief 
operations  are  to  be  carried  on  or  its  principal  office  is  located,  or 
before  a  notary  public  of  the  commonwealth,  and  be  accompanied 
by  an  affidavit  as  to  the  truth  of  the  statements  contained  in  it.  No- 
tice of  intention  to  apply  for  a  charter  must  be  advertised  in  the 
proper  county  for  three  weeks.  The  certificate  of  incorporation 
accompanied  by  proof  of  publication  of  such  notice  is  then  presented 
to  the  governor  and  a  bonus  of  one- third  of  one  per  cent  of  the 
amount  of  capital  stock  the  company  is  authorized  to  have,  is  paid 
to  the  state  treasurer.  If  upon  examination  the  governor  finds  the 
certificate  of  incorporation  to  be  in  proper  form  and  in  accordance 
with  the  provisions  of  the  law,  he  indorses  his  approval  thereon  and 
directs  that  letters  patent  be  issued  incorporating  the  subscribers  and 
their  associates  and  successors  into  a  corporation  by  the  name  chosen. 
The  certificate  is  recorded  in  the  office  of  the  secretary  of  the  com- 
monwealth and  also  in  the  office  of  the  recorder  of  deeds  in  and  for 
the  county  where  the  business  is  to  be  carried  on.  This  completes 
the  process  of  incorporation,  but  before  the  various  branches  of  busi- 
ness authorized  can  be  commenced  such  corporation  is  required  to 
have  a  paid-up  capital  of  $125,000,  an  affidavit  of  which  fact,  made 
by  the  treasurer,  must  be  filed  with  the  secretary  of  the  common- 
wealth, and  the  names  of  the  company's  officers  must  be  filed  in  the 
office  of  the  auditor  general. 

The  Massachusetts  Act  of  1904  relative  to  the  incorporation  and 
reserve  fund  of  trust  companies  provides  that  fifteen  or  more  persons 
who  associate  themselves  by  an  agreement  in  writing  for  the  purpose 
of  forming  a  trust  company,  may,  upon  compliance  with  the  require- 


ORGANIZING  A  TRUST  COMPANY  1 7 

ments  set  forth  in  the  act,  become  such  a  corporation  subject  to  the 
general  laws  relating  to  such  corporations.  The  agreement  must 
state  the  name  of  the  company,  the  purpose  for  which  it  is  formed, 
its  location,  amount  of  capital  stock,  and  number  of  shares.  Each 
subscriber  is  required  to  state  his  address  and  the  number  of  shares 
which  he  takes.  A  notice  of  the  intention  of  the  subscribers  to  form 
such  a  trust  company  is  given  to  a  board  of  commissioners,  and 
advertised  for  three  weeks  in  the  town  in  which  it  is  proposed  to 
establish  the  company.  Within  thirty  days  after  the  first  publica- 
tion of  the  notice,  application  is  made  to  the  board  of  commissioners 
for  a  certificate  that  the  public  convenience  and  advantage  will  be 
promoted  by  the  establishment  of  such  a  trust  company.  The 
board  has  power  to  refuse  the  certificate,  in  which  case  the  appli- 
cation can  be  renewed  after  one  year.  The  law  further  provides 
for  the  details  connected  with  the  preliminary  organization  of  the 
company  and  for  filing  certificates  and  records  of  organization. 
After  approval,  the  certificate  is  filed  with  the  secretary  of  the  com- 
monwealth, who,  upon  payment  of  the  requisite  fee,  issues  a  certifi- 
cate of  incorporation.  The  capital  stock  of  such  corporation  cannot 
be  more  than  $1,000,000  nor  less  than  $100,000,  the  shares  to  be 
$100  each.  No  stock  can  be  issued  until  the  par  value  of  such 
shares  has  been  actually  paid  in  cash.  After  the  entire  stock  has 
been  issued,  a  list  of  the  stockholders,  with  their  addresses  and  hold- 
ings, is  filed  with  the  board  of  commissioners,  who,  after  verification 
of  the  facts  as  reported  and  proof  that  all  the  legal  formalities  have 
been  complied  with,  issue  a  certificate  authorizing  the  company  to 
commence  business. 

Massachusetts  was  the  first  state  to  require  the  trust  companies 
to  carry  a  fixed  reserve  to  secure  deposits.  This  reserve  must 
equal  fifteen  per  cent  of  the  deposits  subject  to  withdrawal  upon 
demand  or  within  ten  days.  One-third  of  the  reserve  must  be  in  law- 
ful money ;  at  least  one-half  the  remainder  must  be  on  deposit  with 
national  banks  in  Massachusetts,  New  York  City,  Philadelphia, 
Chicago,  or  Albany,  and  the  balance  in  bonds  of  the  United  States  or 
the  state  of  Massachusetts. 

The  provisions  as  to  reserves  apply  to  all  trust  companies, 
whether  incorporated  under  the  general  laws  of  the  state  or  by 
special  act  of  legislature. 


1 8  THE  MODERN  TRUST  COMPANY 

In  Illinois  there  is  a  general  corporation  act,  an  act  concerning 
corporations  with  banking  powers,  and  an  act  providing  for  and 
regulating  the  administration  of  trusts  by  trust  companies.  Trust 
companies  organized  under  the  general  corporation  act  are  debarred 
from  carrying  on  a  banking  business.  Corporations  organized 
under  the  banking  act  have  an  imperfect  power  to  accept  and 
execute  trusts,  which  power  may  be  perfected  by  the  lodging  of  a  de- 
posit with  the  auditor  of  public  accounts  in  compliance  with  the  pro- 
visions of  the  trust  act.  In  the  case  of  companies  of  the  latter 
character,  incorporation  is  effected  by  making  an  application  to  the 
state  auditor  for  permission  to  organize,  stating  the  place  of  business, 
the  amount  of  capital,  the  name  under  which  it  is  desired  to  organize, 
and  the  time  for  which  the  association  or  corporation  shall  continue. 
This  statement  shall  be  under  seal  and  acknowledged  before  some 
officer  authorized  to  take  acknowledgments  to  deeds.  Upon  compli- 
ance with  these  requirements,  permission  is  granted  by  the  auditor 
to  organize,  provided  no  permit  has  been  granted  to  any  other  associa- 
tion of  the  same  name.  The  act  requires  that  the  capital  stock  shall 
be  divided  into  shares  of  $100  each,  and  provides  for  the  opening  of 
books  of  subscription  to  the  capital  stock,  for  organization  by  the  sub- 
scribers and  for  the  election  of  directors  who  are  required  to  take  an 
oath  "of  fealty  to  the  association,"  with  the  pledge  that  they  will  not 
knowingly  violate  the  provisions  of  the  act.  Lists  of  stockholders  are 
given  to  the  auditor  and  such  other  information  as  he  may  require. 
After  organization  and  the  full  payment  of  capital  stock,  the  auditor 
is  required  to  make  a  thorough  examination  into  the  affairs  of  the  asso- 
ciation, and  if  fully  satisfied  he  issues  a  certificate  authorizing  the 
commencement  of  business.  Upon  the  recording  of  this  certificate, 
incorporation  is  completed.  The  minimum  capital  required  for  such 
a  company  varies  according  to  the  population  of  the  city,  town,  or 
village  in  which  it  is  located,  —  from  $25,000  when  the  number  of 
inhabitants  does  not  exceed  five  thousand  to  $200,000  in  cities  or 
towns  with  a  population  of  fifty  thousand  or  more.  The  deposit 
referred  to  above  as  required  by  the  trust  act  is  a  deposit  of  $200,000 
in  cities  or  towns  of  one  hundred  thousand  inhabitants  or  more,  and 
$5'o,ooo  in  cities  or  towns  of  less  than  one  hundred  thousand. 

The  charter  granted  by  any  state  defines  the  scope  and  purpose 
of  the  business  and  the  limits  within  which  its  functions  are  confined. 


ORGANIZING  A  TRUST  COMPANY  19 

The  by-laws  are  framed  and  adopted  by  the  stockholders,  but  must 
contain  no  provisions  contrary  to  the  laws  of  either  state  or  nation. 
They  vary  according  to  the  nature  of  the  business  and  the  opinions  of 
those  who  draft  them.  They  should  be  simple  but  comprehensive, 
and  should  govern  matters  not  covered  by  charter  provisions.  They 
usually  regulate  the  time  and  manner  of  holding  elections,  stock- 
holders' and  board  meetings,  define  the  duties  of  directors  and  officers, 
and  provide  for  the  general  management  of  the  business. 

The  board  of  directors,  by  resolution,  also  adopts  rules,  more 
particularly  defining  the  duties  of  employees  and  regulating  the  de- 
tails of  office  management  which  the  officers  are  left  to  carry  out.  A 
corporate  seal  is  adopted,  which  is  affixed  to  documents  executed  by 
the  company. 

An  easily  accessible  location  should  be  chosen  by  the  company, 
and  the  building  should  be  planned  with  a  view  to '  the  convenience 
of  the  customers  as  well  as  of  the  office  force.  In  states  where 
branch  offices  are  allowed,  these  are  generally  used  for  the  receipt 
and  payment  of  deposits,  and  occasionally  for  making  loans.  They 
may  also  contain  safe  deposit  vaults.  Sometimes  they  are  built  in  a 
shopping  district  or  in  the  suburbs,  in  order  to  hold  or  increase 
business  which  might  not  be  secured  at  the  main  office. 

The  original  shares  of  stock  are  often  issued  at  a  premium,  in  order 
to  provide  a  surplus  fund  from  the  start.  The  amount  of  capital 
should  be  ample  to  provide  for  the  proper  conduct  of  the  business 
and  insure  financial  stability.  It  should,  however,  not  be  so  large 
that  it  cannot  be  profitably  employed  without  taking  questionable 
risks.  A  surplus  fund  should  be  accumulated  out  of  the  undivided 
profits,  before  any  distribution  of  dividends  is  made  to  the  stock- 
holders, —  otherwise,  an  unexpected  loss  may  impair  the  capital  and 
lead  to  disastrous  results. 

As  business  grows  and  develops  uses  for  additional  capital,  it  is 
not  unusual  to  increase  the  amount  of  capital  stock,  and  offer  the 
new  shares  to  the  stockholders  either  at  their  par  value  or  at  a  figure 
in  excess  thereof  but  somewhat  lower  than  the  market  value  of  the 
old  stock,  the  amount  received  above  the  par  value  being  used  to 
increase  the  surplus  fund. 

When  the  stock  of  the  company  is  "listed"  on  the  local  stock 
exchange,  the  rules  of  the  exchange  have  to  be  complied  with,  as  to 


20  THE   MODERN   TRUST   COMPANY 

statements  of  condition,  declaration  of  dividends,  transfers  and  reg- 
istration of  stock,  the  form  of  the  stock  certificates,  and  various 
details. 

The  capital  stock  of  trust  companies  is  more  or  less  inactive  in 
the  market,  and  when  the  business  is  successful  but  small  amounts 
are  offered  for  sale.  The  larger  part  of  such  offerings  consists  of 
the  holdings  of  estates  in  the  course  of  settlement.  The  shares  are 
moreover  often  high-priced,  selling,  it  may  be,  for  many  times  their 
par  value  and  at  a  figure  which  gives  a  low  return  on  the  invest- 
ment. The  result  is  a  rather  limited  market  for  this  type  of  invest- 
ment, so  that  in  spite  of  the  elimination  of  the  speculative  value 
attaching  to  securities  which  are  readily  bought  and  sold  and  of  which 
there  is  always  an  available  supply,  fluctuation  in  the  price  of  trust 
company  shares  may  be  induced  by  buying  or  selling  orders  of  even 
moderate  amount.  It  therefore  becomes  important  to  consider 
what  effect  such  variation  in  price  may  have  on  the  business  of  the 
company.  It  is  notorious  that  the  public  buys  on  a  rising  market 
and  sells  on  a  falling  one.  As  fickle  rumor,  combined  with  a  drop  in 
the  value  of  its  shares,  may  adversely  affect  the  clientele  of  a  trust 
company,  it  is  to  the  best  interest  of  the  corporation  that  its  shares 
should  sell  at  as  nearly  uniform  a  figure  as  possible,  with  a  tendency 
to  rise  gradually  with  increase  in  business  and  profits.  The  ideal 
condition  is  naturally  that  of  a  profitable  business  whose  shares  are 
always  in  demand,  so  that  the  floating  supply  can  be  left  to  take  care 
of  itself. 

To  lessen  the  danger  from  temptation  to  "support  the  stock"  by 
buying  shares  offered  for  sale  but  for  which  there  are  no  bidders,  in 
some  states  restrictions  have  been  imposed  by  statute  prohibiting 
trust  companies  from  making  loans  on  their  own  shares.  The  funds 
of  a  trust  company  should  never,  directly  or  indirectly,  be  used  for 
this  purpose,  whether  there  be  legal  restrictions  in  the  way  or  not. 

It  is,  however,  perfectly  proper  for  those  who  have  an  intimate 
knowledge  of  the  business  and  a  belief  in  its  future,  not  only  to  employ 
profitably  their  idle  funds,  but  to  aid  materially  the  status  of  the  com- 
pany by  purchasing  such  shares  as  come  upon  the  market,  for  which 
ready  purchasers  cannot  be  found. 

As  trust  company  shares  have  an  intrinsic  value  and  also  represent 
an  intangible  but  none  the  less  real  "good- will,"  they  are  —  when  the 


ORGANIZING  A  TRUST  COMPANY  21 

company  is  doing  a  legitimate  and  growing  business  —  an  attractive 
form  of  investment.  Trust  company  shares,  the  country  over,  have 
returned  handsome  profits  to  their  owners,  and  the  proportion  of 
failures  to  the  total  amount  invested  in  these  corporations  has  been 
exceedingly  small. 

STOCKHOLDERS 

Many  life  and  fire  insurance  companies  and  savings  institutions 
are  organized  on  a  mutual  basis.  Trust  companies  and  banks  are 
organized  as  stock  companies,  but  some  trust  companies  which  still 
carry  on  life  insurance  keep  up  a  mutual  organization  in  that  depart- 
ment. In  the  mutual  insurance  company,  a  number  of  individuals 
combine  for  the  purpose  of  collectively  transacting  business  which 
it  would  be  impracticable  to  transact  individually.  The  general  law 
of  averages  enables  them  to  take  many  risks  safely  at  low  cost  when 
singly  the  business  would  be  hazardous  in  the  extreme.  In  the  same 
way,  the  small  savings  of  many  depositors  can  be  safely  and  profitably 
employed  where  the  individual  balance  cannot  be  put  to  profitable 
use  and  is  in  constant  risk  of  loss  when  kept  in  the  proverbial  stock- 
ing or  tea-pot.  Purely  mutual  companies  have  no  capital  stock,  and 
the  profits  are  divided  among  the  policy-holders  or  depositors. 

In  organizing  a  trust  company,  the  promoters  and  original  sub- 
scribers provide  the  necessary  capital  for  the  conduct  of  the  busi- 
ness, becoming  the  owners  of  stock  in  amounts  representing  their 
respective  subscriptions,  and  thereby  entitled  to  receive  a  return  on 
the  capital  so  invested,  in  the  form  of  dividends  paid  out  of  the 
profits  of  the  business.  The  capital  stock  of  a  trust  company  is 
usually  divided  into  shares  of  the  par  value  of  either  $50  or  $100  each. 

The  stockholders,  as  the  owners  or  proprietors,  being  often 
many  in  number  and  widely  scattered,  delegate  the  management  of 
the  company's  business  to  a  board  of  directors  as  their  representa- 
tives. The  directors  in  turn  choose  skilled  officers  to  direct  the 
details  of  the  business,  confining  their  attention  as  a  board  to  the 
control  of  its  general  policy. 

The  stockholder  has  definite  legal  rights  and  privileges.  He 
attends  and  votes  at  stockholders'  meetings,  and  the  vote  of  the 
majority  is  the  final  authority  to  which  both  president  and  directors 
must  bow. 


22  THE   MODERN   TRUST   COMPANY 

The  stockholders  meet  annually  to  receive  reports  and  choose 
directors,  and  in  many  companies  it  is  customary  on  these  occasions 
to  provide  a  luncheon,  which  gives  an  opportunity  for  personal  con- 
tact and  social  intercourse  between  the  officers  and  directors  and 
those  whose  interests  they  represent.  The  routine  of  the  annual 
meeting  generally  consists  in  the  choice  of  two  stockholders  to  act  as 
chairman  and  secretary  respectively,  the  reading  of  the  minutes  of 
the  last  meeting  and  of  reports  covering  the  year's  business,  and 
the  election  of  directors.  Tellers  are  chosen  who  conduct  the  elec- 
tion, by  ballot,  and  report  the  result  to  the  meeting. 

Each  share  of  stock  held  entitles  its  owner  to  one  vote,  and  as 
voting  by  proxy  is  usually  permitted,  a  large  stock  vote  is  often  re- 
corded when  there  are  but  few  persons  present.  The  regulations  as 
to  voting  by  proxy  are  as  a  rule  fixed  by  statute,  but  occasionally 
among  older  companies  one  finds  curious  by-law  provisions,  which 
look  to  preventing  an  overthrow  of  the  established  order.  One  such 
provision  is  that  an  individual  shall  not  vote  on  the  proxy  of  more 
than  one  stockholder.  The  period  for  which  a  proxy  holds  good  is 
usually  limited. 

In  times  of  prosperity  the  stockholders'  meetings  are  likely  to  be 
cut-and-dried  affairs,  all  the  details  having  been  prearranged,  even 
to  the  perfunctory  resolution  of  thanks  to  the  officers  and  directors; 
but  this  is  not  always  the  case. 

Sometimes  it  is  wise  to  provide  beforehand  against  attempts  of 
stockholders  to  make  trouble,  for  the  reputation  of  a  financial  cor- 
poration is  easily  hurt  by  the  knowledge  on  the  part  of  the  public 
that  its  administration  is  not  harmonious.  Nothing  so  arouses  a 
stockholder's  suspicions  as  an  impression  that  information  is  being 
withheld  which  may  have  an  important  bearing  on  the  business  of 
the  company.  The  stockholders  should  always  be  given  frank  and 
full  statements  of  condition,  and  should  never  be  allowed  to  feel 
that  information  to  which  they  are  entitled  is  kept  from  them. 
There  is  a  point  beyond  which  secrecy  becomes  an  injustice  if  not 
a  crime.  It  is  a  good  rule  not  only  to  give  all  information  which 
is  required  by  law  to  be  made  public,  but  as  much  more  as  can 
safely  be  given  without  breaking  confidences  on  the  one  hand  or 
disclosing  facts  which  could  be  made  use  of  by  competitors  on  the 
other.  While  it  is  wise  to  show  the  directors  the  gross  amount  of 


ORGANIZING  A  TRUST  COMPANY  23 

both  gains  and  losses,  it  may,  however,  be  poor  policy  to  show  stock- 
holders more  than  the  net  result,  as  some  of  them  might  not  under- 
stand that  a  banking  business,  however  well  managed,  cannot  avoid  an 
occasional  loss,  and  to  give  them  all  the  details  in  such  a  case  might 
result  in  an  entirely  unjustified  lack  of  confidence. 

Owing  to  the  nature  of  a  trust  company's  business,  it  is  a  decided 
advantage  to  have  stockholders  of  solid  and  responsible  character, 
who  hold  the  shares  as  a  permanent  investment  and  not  for  specu- 
lative purposes.  The  stockholders,  on  their  side,  should  realize  that 
it  is  for  their  direct  interest  to  send  business  to  the  company,  and 
by  cordial  cooperation  with  directors  and  officers  to  increase  the 
prosperity  of  the  corporation. 

Under  the  National  Banking  Act  the  stockholders  of  national 
banks  are  liable  to  the  extent  of  the  amount  of  their  stock  therein  at 
the  par  value  thereof,  in  addition  to  the  amount  invested  in  their  shares. 
Laws  vary  as  to  state  banks  and  trust  companies.  The  charters  of 
the  older  companies  incorporated  by  special  acts  of  legislature  usually 
provided  that  the  shareholders  were  not  individually  liable  for  debts 
of  the  corporation  beyond  the  amount  required,  if  any,  to  make  their 
stock  full  paid.  This  fact  has  made  such  shares  an  attractive  form 
of  investment  to  many  conservative  people  who  were  unwilling  to 
hold  bank  shares  carrying  a  double  liability.  There  is,  however,  at 
present  a  tendency  in  some  quarters  to  require  a  liability  over  the 
amount  invested  in  the  case  of  new  trust  companies  organized  under 
general  corporation  laws,  and  in  some  states,  such  as  Massachusetts, 
an  older  company  operating  under  a  special  charter  can  only  obtain 
the  advantages  of  the  general  law  by  agreeing  to  accept  all  its  condi- 
tions including  that  of  increased  liability  of  shareholders.  This  has 
deterred  certain  of  the  older  companies  from  coming  under  the  later 
laws,  on  the  ground  that  the  advantages  to  be  obtained  were  not 
sufficient  to  compensate  for  the  added  liability  which  would  have  to 
be  assumed  by  the  shareholders. 

BOARD   OF  DIRECTORS 

The  success  of  any  corporation,  industrial  or  financial,  depends 
in  great  measure  on  the  character,  judgment,  and  ability  of  those 
who  direct  its  affairs. 


24  THE  MODERN   TRUST  COMPANY 

The  detail  and  routine  business  of  a  trust  company  is  managed 
by  the  paid  executive  officers,  while  the  larger  questions  of  policy  are 
determined  by  the  directors,  among  whom  one  or  more  of  the  execu- 
tive officers  are  found.  The  first  qualification  of  a  director  usually 
required  by  the  by-laws,  if  not  by  statute,  is  that  he  be  a  holder  of 
stock,  but  as  an  able  man  of  moderate  means  can  often  render 
important  service,  the  prescribed  number  of  shares  is  generally  small. 
Indeed,  a  directorship  is  frequently  offered  to  a  desirable  candidate 
who  buys  the  few  necessary  shares  on  or  before  his  election  to  the 
board. 

While  the  larger  stockholders  generally  have  representation  on 
the  board  in  proportion  to  their  holdings,  not  many  of  them  act 
as  directors,  both  because  the  board  is  composed  of  relatively  few 
as  compared  with  the  total  number  of  shareholders,  and  because  the 
capitalist  is  often  averse  to  assuming  duties  which  can  be  performed 
to  his  satisfaction  by  an  appointee  sure  to  conserve  his  interests.  It 
is  common  to  hear  that  a  director  represents  certain  large  interests, 
and  in  this  case  even  though  his  own  holdings  of  stock  may  be 
merely  nominal,  his  voice  carries  great  weight  in  the  management  of 
the  corporation. 

As  the  director  is  primarily  responsible  for  the  broader  questions 
of  policy,  it  is  essential  that  for  this  important  position  men  should  be 
chosen  who  are  of  known  probity  and  bear  an  unsullied  name  and 
character,  who  stand  for  honorable  dealing,  for  progress,  and  who 
in  private  life  and  business  have  demonstrated  their  capacity  for 
success. 

The  list  of  directors  is  apt  to  be  scrutinized  with  as  much  care 
as  the  balance  sheet  by  the  prospective  customer  or  purchaser  of 
stock.  It  is  therefore  most  important  that  men  whose  character 
cannot  stand  the  light  of  publicity,  or  those  who  are  narrow  or 
unscrupulous,  should  never  be  permitted  to  become  directors.  When 
a  man  has  failed  in  the  conduct  of  his  personal  affairs,  he  should 
be  given  a  directorship  only  after  the  most  serious  consideration  of 
the  circumstances  responsible  for  past  disasters.  "Their  fathers' 
sons,"  too,  are  at  times  questionable  assets  on  a  board  of  directors, 
and  a  sentimental  desire  to  perpetuate  the  name  and  family  connec- 
tion should  never  be  allowed  to  influence  a  choice  unless  there  are 
other  qualifications  for  the  position. 


ORGANIZING  A  TRUST  COMPANY  25 

The  number  of  the  directors  being  fixed  by  the  by-laws  of  the 
corporation,  it  can,  within  prescribed  legal  limits,  be  increased  or 
decreased  without  much  difficulty.  In  this  way  the  services  of  a 
desirable  man  may  often  be  secured  even  though  there  has  pre- 
viously been  no  vacancy.  When  a  small  company  is  absorbed  by 
a  larger  one,  it  is  not  uncommon  to  enlarge  considerably  the  board  of 
the  consolidated  institution,  so  as  to  retain  desirable  members  of  the 
board  of  the  smaller  concern.  The  largest  companies  usually  have 
a  considerable  number  of  directors,  in  order  to  give  the  institution  a 
proper  standing  in  the  eyes  of  the  community,  and  to  secure  business 
through  as  many  channels  as  possible. 

If  a  trust  company  has  a  small  board,  it  is  possible  and  indeed 
necessary  that  each  member  should  keep  closely  in  touch  with  its 
business.  In  a  large  board  it  is  not  practicable  for  all  the  members 
to  give  attention  to  many  matters  of  detail.  The  committee  system 
is  a  natural  result,  and  it  is  the  usual  practice  in  large  boards  to  delegate 
duties  to  committees,  which  in  turn  report  to  the  board  itself.  A 
large  board,  using  the  reports  of  committees  as  a  guide  to  intelligent 
action  on  the  various  matters  brought  before  it,  is  a  satisfactory 
organization  for  doing  business,  and  safeguarding  and  promoting 
the  affairs  of  the  company. 

When,  however,  as  is  too  often  the  case,  the  functions  of  the 
board  are  delegated  to  a  small  executive  committee  composed  of  the 
president  and  two  or  three  other  members,  the  system  can  become 
very  dangerous.  There  are  to-day  many  directors  who,  although 
willing  and  anxious  to  do  their  share  of  work,  find  themselves  almost 
in  the  position  of  outsiders,  their  only  duties,  apparently,  being  to 
lend  the  use  of  their  names,  and  attend  cut-and-dried  monthly  meet- 
ings of  the  board  at  which  no  insight  into  the  affairs  of  the  com- 
pany is  given  them  and  they  are  only  called  on  to  ratify  the  acts  of 
their  colleagues  on  the  "inside." 

The  by-laws  of  nearly  all  financial  institutions  give  their  boards 
the  right  to  fill  vacancies  in  their  number.  The  very  general  ad- 
herence to  this  principle  seems  to  indicate  its  wisdom,  for  continuity 
in  policy  is  essential  in  the  management  of  financial  affairs,  and  too 
radical  changes  are  to  be  avoided.  Moreover,  the  members  of  the 
board  are,  or  ought  to  be,  either  those  most  heavily  interested  in 
the  corporation,  or  their  especially  chosen  representatives,  and  conse- 


26  THE   MODERN  TRUST   COMPANY 

quently  the  best  judges  of  the  qualifications  of  their  associates.  The 
tendency  of  boards  of  directors  to  become  self-perpetuating  and 
autocratic  bodies  is  held  in  check  by  the  fact  that  the  final  control 
is  always  in  the  hands  of  a  majority  of  the  shareholders. 

The  most  important  duty  of  the  board  is  to  control  the  general 
policy  of  the  company.  How  to  meet  competition,  to  secure  new 
business,  to  hold  on  to  that  already  in  hand,  when  to  branch  out 
into  new  fields,  to  feel  the  pulse  of  the  public,  and  to  gauge  the  out- 
look for  the  future,  these  and  a  thousand  other  problems  have  to 
be  met  with  sound  judgment  and  a  wide  knowledge  of  affairs.  In 
the  selection  of  the  executive  officers,  the  directors  exercise  an  equally 
important  function.  To  the  executive  officers  the  director  can  lend 
the  greatest  assistance  in  securing  new  business.  His  commanding 
position  in  the  commercial  and  financial  world  should  give  many 
opportunities  for  directing  to  his  company  business  which,  once 
secured,  efficient  officers  should  have  but  little  difficulty  in  holding. 
The  rapid  growth  of  many  of  the  more  recently  established  trust 
companies  is  a  direct  outcome  of  the  united  personal  efforts  of  the 
directors  and  officers,  and  shows  what  can  be  done  even  in  the  face 
of  keen  competition.  If  the  director  is  to  keep  in  close  touch  with 
the  affairs  of  the  company,  he  must  be  conscientious  in  his  attend- 
ance on  board  and  committee  meetings,  and,  no  matter  what  con- 
fidence he  may  feel  in  officers  and  fellow-directors,  must  take  his  share 
of  the  responsibility.  The  absentee  director  is  likely  to  be  more  of 
a  hindrance  than  a  help  on  the  rare  occasions  when  he  does  put  in 
an  appearance.  Where  it  is  the  practice  to  have  audits  and  ex- 
aminations of  assets  made  by  members  of  the  board,  it  is  the  duty 
of  every  director  to  do  his  part,  not  only  to  obtain  familiarity  with 
the  details  of  the  business,  but  for  the  protection  of  all  concerned. 
As  a  certain  number  of  directors  are  usually  required  by  law  to  attest 
the  correctness  of  statements  of  condition,  it  is  really  essential  for 
the  director  to  have  personal  knowledge  of  the  truth  of  these  reports. 

The  direct  returns  from  the  position  of  director  are  few,  as  the 
post  is  an  unsalaried  one.  The  small  gold  pieces  received  in  some 
companies  as  an  honorarium  for  attending  board  meetings  and 
periodical  examinations  of  assets  are  usually  the  only  direct  pay- 
ments, and  these  are  given  not  so  much  in  return  for  service 
rendered  as  to  insure  a  quorum  —  an  admission  that  human  nature 


ORGANIZING  A  TRUST  COMPANY  2? 

in  the  person  of  the  director  is  much  the  same  as  in  the  least  of  those 
who  are  dependent  on  him. 

The  indirect  returns  to  the  director  of  a  trust  company  are  con- 
siderable. The  intimate  relation  which  he  bears  to  the  business  is 
often  of  great  value  to  him,  and  the  knowledge  of  people  and  affairs 
which  he  thus  gains  can  legitimately  aid  in  the  management  of  his 
personal  concerns.  The  danger  is  that,  by  the  unscrupulous,  such 
a  position  of  honor,  trust,  and  responsibility  may  easily  be  perverted 
to  selfish  ends.  The  director  should  never  fail  to  realize  that  as  the 
representative  of  the  whole  body  of  stockholders,  his  first  duty  is 
to  protect  their  interests.  If  as  an  individual  he  transacts  business 
with  the  company  on  whose  board  he  sits,  he  must  always  remember 
that  when  acting  in  one  capacity  he  is  incompetent  to  advise  in  the 
other.  No  director  should  be  allowed  to  do  business  with  the  com- 
pany merely  because  he  is  a/  director,  or  for  any  other  reason  than 
that  it  is  to  the  company's  best  interest  to  deal  with  him.  He  must 
be  careful,  too,  not  to  abuse  his  authority  by  thoughtlessly  encourag- 
ing subordinates  to  break  rules  for  his  convenience  and  so  interfere 
with  the  discipline  of  the  office. 

Whether  a  single  individual  should  occupy  the  position  of  director 
in  more  than  one  company  doing  the  same  business  in  the  same  city  or 
town  is  often  a  serious  question.  Undoubtedly,  the  director  of  a  trust 
company  is  of  most  value  when  he  has  numerous  interests  of  other 
sorts.  It  is,  however,  difficult  to  see  how  he  can  be  connected  with 
competing  organizations,  without  at  times  promoting  the  interests 
of  one  at  the  expense  of  the  other. 


CHAPTER   III 
OFFICERS 

INTRODUCTION 

THE  official  staff  of  a  trust  company  varies  with  its  size  and  busi- 
ness. No  matter  how  small  the  organization,  there  should  never  be 
less  than  two  executive  officers,  performing  the  duties  of  president 
and  of  secretary  and  treasurer.  If  the  business  will  not  admit  of  pay- 
ing salaries  large  enough  to  secure  the  services  of  additional  officers, 
a  member  of  the  board  of  directors  should  serve  as  vice-president 
and  take  charge  when  the  president  is  absent,  and  a  clerk  should 
act  for  the  treasurer  in  similar  cases.  The  executive  positions  and 
duties  are  often  combined  in  various  ways ;  vice-president  and  treas- 
urer, treasurer  and  secretary,  trust  officer  and  secretary,  are  some 
of  the  more  usual  combinations.  The  arrangement  depends,  how- 
ever, on  the  size  of  the  company,  the  number  of  officials,  and  the 
individual  abilities  of  each.  What  seems  a  logical  and  proper 
division  of  duties  at  one  time,  may  after  a  change  of  officers  fail  to 
secure  effective  results,  and  require  a  rearrangement. 

Each  department  should  be  in  charge  of  an  officer  and  when  new 
lines  of  business  are  taken  up  new  heads  of  departments  must  be 
appointed  to  direct  them.  No  company  should  be  under- officered. 
The  present  tendency  to  have  an  ample  number  of  officers  is  par- 
ticularly noticeable  among  the  more  recently  organized  and  larger 
companies,  as  compared  with  the  older  ones.  The  business  of  a 
trust  company  is  far  more  complex  than  that  of  a  national  bank, 
and  consequently  a  larger  proportion  of  officers  is  needed  in  order 
to  provide  for  the  innumerable  and  constantly  varying  details  which 
require  an  officer's  attention. 

In  addition  to  the  president,  one  occasionally  finds  a  chairman 
of  the  board  of  directors  who  presides  over  its  deliberations  but  does 

28 


OFFICERS  29 

not  perform  any  administrative  functions.  This  expedient  is  some- 
times resorted  to  in  the  case  of  the  consolidation  of  two  companies 
when  it  is  desired  to  retain  the  services  of  the  presidents  of  both. 
Curious  relics  of  the  past  are  also  occasionally  perpetuated,  as  in  a 
New  England  trust  company  where  the  chief  executive  officer  bears 
the  title  of  " actuary,"  and  the  so-called  "president"  acts  only  as 
chairman  of  the  board  of  directors. 

In  a  large  company  there  are  frequently  several  vice-presidents 
and  assistant  officers  —  each  one  in  charge  of  some  part  of  the  busi- 
ness. An  arrangement  of  this  sort  not  only  tends  to  keep  the  com- 
pany at  all  times  adequately  officered,  and  prevents  the  officers 
from  being  too  much  tied  down  to  their  desks,  but  also  often  makes 
it  possible  to  retain  the  services  of  capable  and  efficient  employees, 
who  as  assistant  officers  are  content  to  stay  on  at  a  moderate  salary 
when  as  mere  clerks  they  would  probably  be  dissatisfied  and  leave. 
A  trifling  advance  in  salary  when  combined  with  a  title  is  always 
appreciated,  and  is  a  mark  of  confidence  which  generally  results  in 
more  and  better  work.  Whatever  the  titles  or  arrangement  of  duties, 
the  company  should  be  organized  as  a  unit  and  not  as  a  number  of 
entirely  separate  and  unrelated  businesses.  It  is,  of  course,  essential 
that  the  business  of  the  trust  department  be  kept  apart  from 
the  affairs  of  the  company  itself;  at  the  same  time,  uniform  systems 
and  methods  should  be  employed  in  all  departments,  the  carrying 
out  of  which  is  left  to  the  officers  in  charge.  The  greatest 
cooperation  and  harmony  between  the  various  departments  would 
probably  be  secured  if  their  heads  were  considered  a  sort  of  cabinet, 
and  if  important  matters  were  submitted  to  this  body  before  final 
decision  by  the  president.  Were  they  to  hold  regular  meetings  to 
consider  the  details  of  the  company's  business  and  management, 
just  as  the  president  and  finance  committee  of  the  board  consider 
investments  and  general  policy,  each  officer  would  become  better 
versed  in  the  affairs  of  the  company  as  a  whole,  and  correspondingly 
more  efficient  in  the  work  of  his  own  department. 

When  officers  are  engaged  in  outside  business  and  do  not  devote 
their  entire  day  to  the  company's  affairs,  it  is  well  to  have  a  dis- 
tinct understanding  on  the  subject,  for  even  the  best-intentioned 
officer  may  find  it  difficult  so  to  arrange  his  work  that  neither 
his  own  affairs  nor  those  of  the  company  shall  suffer.  Except  in 


30  THE  MODERN   TRUST  COMPANY 

cases  where  the  company  cannot  afford  to  pay  for  the  entire  time  of 
an  officer,  or  where  it  is  thought  wise  to  use  the  name  of  an  influential 
man  who  acts  as  a  figurehead  or  in  an  advisory  capacity,  it  is  best  to 
secure  the  whole  time  and  undivided  services  of  all  the  officers. 

This  need  not,  however,  cut  off  opportunities  of  development 
and  usefulness  through  outside  interests.  One  of  the  reasons  often 
given  for  the  unsatisfactory  condition  of  municipal  affairs  in  this 
country  is  the  supine  attitude  and  lack  of  civic  pride  of  many 
corporation  officers,  who  shun  politics  and  do  not  dare  to  express 
their  opinions  or  take  a  vigorous  stand  against  political  wrong- 
doing, for  fear  that  such  action  may  antagonize  the  political  powers 
and  result  in  hostile  legislation  or  annoyance  of  an  even  more  direct 
character.  It  is  no  more  necessary  for  a  trust  company  officer  than 
for  anybody  else  to  rush  precipitately  into  public  controversies,  yet 
a  live  interest  in  public  affairs,  a  well-developed  social  as  well  as 
private  conscience,  with  a  realization  of  the  duties  and  responsibili- 
ties of  citizenship,  are  important  characteristics  of  the  highest  and 
most  truly  successful  type  of  corporation  officer.  Officers  cannot 
take  too  much  interest  in  public  matters,  provided  they  always  bear 
in  mind  their  duty  to  their  employers  and  permit  neither  outside  in- 
terests nor  personal  affairs  to  interfere  with  the  company's  business. 

Confidence  is,  next  to  financial  soundness,  the  foundation  on 
which  a  trust  company  must  build,  and  the  organization  is  judged 
largely  by  the  character  of  its  directors  and  officers  and  the  personnel 
of  the  office  force.  It  is  therefore  necessary  that  the  officers  of  a 
trust  company  should  show,  even  by  their  smallest  actions,  that 
implicit  confidence  may  be  placed  in  them.  They  should  never 
accept  presents,  commissions  or  rebates  of  any  sort,  direct  or  indirect, 
nor  indulge  in  speculation  even  of  the  mildest  kind,  and  such  practices 
should  be  strictly  forbidden.  A  trust  company  officer  who  takes  com- 
missions or  dabbles  in  stocks  is  bound,  in  the  end,  to  injure  not  only 
himself,  but  the  company  with  which  he  is  connected.  Sufficient 
salary  should  be  paid  to  enable  each  officer  to  live  comfortably,  so 
that  he  need  have  no  excuse  for  resorting  to  these  means  of  eking 
out  an  insufficient  income.  Clear  insight  and  a  robust  standard  of 
integrity  are  the  only  protection  against  the  more  insidious  forms  of 
"  graft "  which  present  themselves  in  the  alluring  guise  of  legitimate 
opportunities  for  private  gain. 


OFFICERS  31 

PRESIDENT 

It  is  a  trite  saying  that  there  is  always  room  at  the  top;  how 
much  room  is  best  realized  by  the  directors  of  a  large  financial  insti- 
tution confronted  with  the  difficult  problem  of  choosing  a  chief 
executive  officer. 

The  prominent  banker  of  a  generation  ago  was  usually  the  man 
who,  having  made  a  success  of  his  business,  had  amassed  capital 
and  then  stepped  from  the  borrowing  to  the  lending  class.  His 
judgment,  matured  by  years  of  contact  with  business  problems,  was 
generally  to  be  relied  on,  and  his  knowledge  of  men  and  affairs  was 
of  no  little  worth  in  forming  opinions  as  to  financial  values. 

The  present  century  is,  however,  one  of  specialization,  and  the 
choice  of  a  progressive  board  of  directors  is  now  likely  to  fall  on 
the  man  who  has  had  a  good  technical  training  in  banking,  rather 
than  on  a  prosperous  merchant  who  has  already  done  his  best  work 
and  is  not  versed  in  the  intricacies  of  finance. 

The  ideal  chief  executive  officer  should  possess  all  the  major 
virtues,  and  not  too  many  of  the  minor  vices.  It  is  rare,  however, 
that  the  "all  round"  man  can  be  found,  and  if  by  any  chance  he  is 
discovered  it  is  still  rarer  that  he  can  be  secured;  for  there  is  to-day 
nothing  which  the  capitalist  needs  more,  and,  having  it,  is  more  loath 
to  part  with,  than  the  services  of  an  executive  officer  of  the  best  type. 

The  successful  president  must  be  a  man  with  common  sense 
and  the  power  of  judging  character.  He  should  be  of  good  address, 
with  pleasant  manners,  and  if  a  ready  wit  happens  to  be  one  of  his 
natural  possessions  it  can  be  turned  to  good  account.  Executive 
ability,  a  level  head,  cool  judgment,  and  firmness  tempered  by 
charity  are  all  important  qualifications  of  the  head  of  any  corpora- 
tion. It  is  better  for  the  president  to  be  in  advance  of  his  time 
than  ever  so  little  behind  it.  To  be  truly  successful,  he  must  be  a 
leader,  not  only  in  finance,  but  in  the  broader  interests  of  the  com- 
munity. 

As  large  powers  vest  in  the  person  of  the  president,  it  behooves  a 
board  of  directors  to  use  the  utmost  diligence  in  their  efforts  to  secure 
the  right  man,  for  it  is  far  easier  to  elect  a  president  than  to  part 
company  with  one.  It  is  essential  that  the  character,  antecedents,  and 
qualifications  of  a  candidate  should  be  thoroughly  investigated,  and 


32  THE  MODERN  TRUST  COMPANY 

evidence  secured  even  in  regard  to  what  seem  petty  details,  which 
may  give  a  clew  to  personal  idiosyncrasies  or  important  traits  of  char- 
acter. Needless  to  say,  the  office  should  invariably  seek  the  man, 
except  in  the  rare  cases  where  undoubted  fitness  or  long  service 
may  justify  a  dignified  application.  As  a  general  rule,  the  man  who 
makes  a  hard  fight  to  secure  the  presidency  of  a  trust  company  and 
who  feels  it  necessary  to  use  political  and  social  influence  to  for- 
ward his  ambition,  by  these  very  acts  proves  that  his  character  and 
the  record  he  has  made  are  not  sufficient  to  warrant  his  selection. 
The  best  men  must  usually  be  offered  the  position  and  given  suffi- 
cient inducements  to  insure  their  acceptance.  The  retired  business 
man  on  the  company's  board  who  is  willing  to  help  his  colleagues 
by  assuming  the  chief  executive  position  is  rarely  the  best  man  for 
the  place,  for  the  qualifications  of  a  good  director  are  often  very 
different  from  those  of  a  successful  president. 

In  the  choice  of  a  president,  it  is  assumed  that  the  board  desires 
to  secure  the  best  available  man,  and  that  the  prosperity  of  the  cor- 
poration is  the  single  end  to  be  gained.  When  other  motives  influence 
a  choice,  it  is  evident  that  the  directors  themselves  are  not  all  that 
could  be  desired,  and  that  the  stockholders  ought  to  make  the 
annual  election  something  more  than  a  perfunctory  occasion. 

The  desire  to  maintain  continuity  of  policy,  and  fear  that  the 
selection  of  an  outsider  may  lead  to  changes  or  unknown  dangers, 
often  induce  the  appointing  body  to  seek  first  a  candidate  from  among 
those  already  connected  with  the  institution.  When  such  a  search 
reveals  a  fit  man,  tried  and  true,  a  well-deserved  promotion  solves 
all  difficulties.  When,  however,  those  already  in  the  employ  of 
the  institution  have  not  the  requisite  qualifications,  neither  a  misap- 
plied civil  service  idea  nor  the  fear  of  change  should  be  allowed  to 
interfere  with  the  selection  of  the  best  available  man  —  wherever  he 
may  be  found. 

It  is  wise  first  to  cover  the  local  field,  as  much  trust  company 
business  is  of  a  personal  and  confidential  nature  and  the  executive 
officer  who  is  familiar  with  the  character  of  his  constituency  is  at 
some  advantage  over  the  man  who  is  forced  to  pick  up  this  knowledge 
after  assuming  office.  If  the  stranger,  however,  brings  with  him 
the  prestige  of  a  reputation  gained  elsewhere,  it  will  tide  over  many 
initial  difficulties  of  his  new  position.  Once  in  the  presidential  chair, 


OFFICERS 


33 


the  executive  officer  should  have  the  loyal  and  unqualified  support 
of  his  board  of  directors,  and  should  be  allowed  wide  latitude  of 
action. 

The  whole  system  of  organization  is  based  on  the  centralization  of 
power  in  the  hands  of  a  single  executive  officer,  in  whose  person,  as 
representative  of  the  stockholders  and  board  of  directors,  authority 
finally  rests,  and  who  simply  delegates  to  subordinate  officers  such 
of  his  powers  as  are  necessary  for  the  proper  conduct  of  the  details 
of  the  institution's  management. 

The  president  is  the  commanding  general  of  the  office  force,  from 
whom  all  orders  emanate,  these  orders  being  carried  out  by  passing 
them  through  the  series  of  officers  who  form  the  chain  necessary 
to  reach  the  desired  point.  The  strict  observance  of  the  custom  of 
passing  all  executive  orders  through  the  heads  of  the  various  depart- 
ments to  the  proper  divisions  and  sections  in  turn,  is  necessary  if  the 
best  discipline  is  to  be  maintained. 

New  business  generally  originates  in  the  president's  office  and 
is  then  referred  to  the  officer  responsible  for  such  work.  If  the  presi- 
dent wishes  to  keep  in  touch  with  an  important  transaction,  he  does 
it,  not  by  handling  the  details  himself,  but  by  close  oversight  of  the 
proper  department.  Rigid  adherence  to  this  principle  is  necessary 
if  confusion  and  costly  errors  are  to  be  avoided.  A  general  officer 
should  never  yield  to  the  temptation  of  personally  attending  to  the 
details  of  some  important  transaction  when  there  is  a  department 
organized  to  care  for  just  such  business. 

As  head  of  the  institution,  the  president,  both  in  and  out  of  his 
office,  sets  an  example  to  his  subordinates  which  is  far  stronger  than 
any  disciplinary  measure,  and  the  employee  will  respond  more  quickly 
to  the  spirit  shown  by  his  chief  than  to  any  number  of  arbitrary  rules. 
While  the  president  cannot,  by  virtue  of  his  office,  be  expected  to 
be  as  regular  in  his  hours  as  is  the  teller  or  bookkeeper,  he  should 
nevertheless  set  a  standard  of  punctuality,  manners,  neatness,  and 
the  thousand  and  one  qualities  which  go  toward  the  making  of  a 
successful  business  man. 

The  president  is  a  directing  officer  and  not  a  clerk,  and  he 
should  therefore  be  given  such  competent  assistance  that  his  time 
need  not  be  wasted  in  doing  work  which  a  subordinate  could  do  just 
as  well.  The  president's  time  is  chiefly  spent  in  consulting  with 


34  THE  MODERN  TRUST  COMPANY 

those  connected  with  the  institution,  and  in  doing  business  with  the 
outside  public.  He  should  arrange  his  duties  so  as  to  avoid  conflict 
between  the  claims  of  the  two.  The  practice  of  the  United  States 
government  departments  is  to  devote  the  first  and  the  last  hour 
of  the  day  to  business  which  requires  consultation  between  the  offi- 
cers of  the  departments,  while  the  rest  of  the  day  is  given  up  to  the 
public.  Even  in  a  trust  company  where  the  public  cannot,  of 
course,  be  kept  out  as  it  is  from  a  government  office,  fewer  business 
calls  are  made  during  the  first  and  last  hours  of  the  day  than  at 
any  other  time. 

The  president  after  reaching  his  office  first  clears  his  desk  of 
the  morning  mail,  then  receives  the  heads  of  the  various  departments, 
and  takes  up  such  matters  of  business  within  the  office  as  require  his 
attention.  These  disposed  of,  the  public  has  its  turn,  with  possible 
interruptions  on  the  part  of  directors  and  employees.  In  a  country 
where  "all  men  are  created  equal,"  it  is  important  that  the  highest 
officials  of  a  trust  company  should  be  readily  accessible  to  the  public. 
Even  the  president  of  the  company  is  for  the  time  being  the  servant 
of  the  customer,  and  the  popularity  of  an  officer  may  very  largely 
depend  on  the  ease  or  difficulty  with  which  he  can  be  approached. 
He  should,  of  course,  be  protected  from  the  book  agent  and  adver- 
tising shark,  but  the  weeding-out  process  can  be  simply  and  effec- 
tively accomplished  by  a  tactful  assistant  in  the  anteroom.  The 
luncheon  hour  is  a  convenient  time  for  the  president  to  meet  and  con- 
sult with  members  of  his  board  and  important  customers,  especially 
if  luncheon  is  served  in  the  building,  as  is  becoming  more  and  more 
the  custom  among  trust  companies. 

When  the  duties  of  the  president  call  him  out  of  his  office,  his 
absences  should  be  regulated  so  as  to  interfere  as  little  as  possible 
with  his  work  inside  the  building,  and  not  only  should  his  assistants 
keep  in  touch  with  his  movements,  but  there  should  always,  if  possible, 
be  some  available  officer  who  can  act  for  him. 

In  addition  to  the  president's  general  duties,  that  of  making 
investments  devolves  upon  him,  with  the  assistance  of  the  finance 
committee  of  the  board.  In  the  matter  of  appointments,  he  is  like- 
wise the  arbiter.  The  officer  in  charge  of  the  department  of  the 
company  into  which  a  new  incumbent  is  to  be  put,  should  be  con- 
sulted in  order  that  a  person  may  be  secured  best  fitted  to  the  special 


OFFICERS  35 

duties  to  be  performed.  Every  one  should,  however,  know  that  while 
the  recommendations  of  the  various  heads  of  departments  in  regard 
to  appointments,  dismissals,  promotions,  and  changes  of  occupation 
have  weight,  the  final  decision  rests  with  the  executive. 

VICE-PRESIDENT 

The  unadorned  statement  of  the  by-laws  that  the  vice-president's 
duty  is  to  assume  the  functions  of  the  president  in  the  absence  or 
disability  of  the  latter,  leaves  this  individual  in  an  even  more  difficult 
predicament  than  the  Vice- President  of  the  United  States,  who  at 
least  has  the  Senate  over  which  to  preside.  Where  the  president  is 
something  more  than  a  figurehead,  it  would  hardly  be  worth  while 
to  pay  a  vice-president  simply  to  stand  ready  to  throw  himself  into 
the  breach  should  occasion  arise.  Additional  functions  must  be 
provided  for  him. 

Many  trust  companies  have  several  vice-presidents,  each  one  of 
whom  is  usually  in  charge  of  some  department.  Where  a  large 
corporate  trust  business  is  transacted,  the  certification  of  bonds  is 
a  duty  usually  assigned  to  the  vice-president.  In  smaller  companies 
the  position  is  often  combined  with  that  of  the  treasurer  or  some 
other  officer.  Occasionally  —  when  the  president  is  the  nominal 
head  —  the  vice-president  virtually  occupies  the  first  position.  What- 
ever the  arrangement,  it  is  essential  to  have  a  vice-president,  so  that 
the  business  of  the  company  shall  not  be  clogged  by  even  the  tem- 
porary absence  of  the  executive.  One  of  the  most  frequent  argu- 
ments for  the  appointment  of  corporate  executors  and  trustees  is 
that  they  never  die  or  change.  Quite  as  important  a  recommenda- 
tion should  be  the  fact  that  during  business  hours  there  is  always 
an  officer  at  hand  who  has  authority  to  transact  any  business  that 
may  arise.  Delay  in  executing  official  documents  or  interviewing 
customers  often  causes  both  loss  and  annoyance.  In  general  it  is  a 
sound  principle  that  in  every  trust  company  there  should  be  two 
individuals  capable  of  filling  each  position,  from  the  highest  to  the 
most  humble. 

The  vice-president,  to  fill  wisely  a  delicate  and  responsible  post, 
must  ever  bear  in  mind  that  the  authority  vested  in  him  is  delegated, 
and  that  he  must  cooperate  with,  and  look  for  guidance  from,  a  superior 


36  THE  MODERN   TRUST  COMPANY 

officer.  The  two  chief  executive  officers  should  always  be  in  close 
touch  and  see  as  much  of  each  other  as  their  respective  duties  will 
permit.  They  can  supplement  each  other  and  so  arrange  their 
work  as  not  to  conflict  or  overlap. 

In  appointing  a  vice-president,  whatever  his  routine  duties,  it  must 
be  remembered  that  at  some  time,  for  longer  or  shorter  periods,  he 
may  be  called  on  to  act  as  president.  His  qualifications  for  filling 
that  position  —  even  temporarily  —  should  be  carefully  weighed  be- 
fore he  is  given  the  responsibilities  and  the  prerogatives  of  the 
second  place. 

TREASURER 

The  treasurer  is  at  the  head  of  the  banking  department.  His 
position  is  analogous  to  that  of  the  bank  cashier. 

The  president  and  vice-president  consider  questions  of  policy, 
the  larger  problems  of  management,  and  the  making  of  investments ; 
the  decision  once  made,  the  treasurer  becomes  responsible  for  the 
actual  transactions,  and  for  the  details  of  all  strictly  banking  business. 

The  treasurer  passes  on  all  new  deposit  accounts,  signs  all  drafts 
for  the  disbursement  of  funds — whether  charge  slips  for  transfers 
within  the  office  or  checks  which  go  outside.  He  is  the  custodian  of 
the  company's  assets  and  is  therefore  responsible  for  the  vaults,  and 
for  the  care  of  the  securities  which  they  contain.  It  is  usual  for  the 
tellers  to  be  held  directly  responsible  for  their  cash.  The  treasurer, 
however,  generally  has  charge  of  the  cash  reserve  not  used  in  the 
current  transactions  of  the  company. 

This  officer  is  charged  with  the  duty  of  making  loans,  subject  to 
such  rules  as  may  be  laid  down  for  his  guidance.  He  needs  to  have 
a  general  knowledge  of  securities  and  their  values,  for  in  considering 
an  application  for  a  loan,  questions  of  rate,  amount  and  character  of 
collateral,  and  other  terms  must  usually  be  decided  on  the  spot.  Nor 
does  his  responsibility  end  with  the  acceptance  of  the  loan.  The 
loan  clerk  is  required  to  figure  the  margin  and  keep  in  touch  with 
the  market  fluctuations ;  but  the  treasurer  will  not  be  doing  his  full 
duty  if  he  does  not  himself  watch  the  developments  of  the  market 
from  day  to  day,  and  keep  a  constant  oversight  of  the  loans  to  see  that 
too  much  of  any  one  security  is  not  held,  and  that  the  loans  are  not 
weakened  by  the  substitution  of  inferior  collateral.  In  times  of 


OFFICERS  37 

panic  a  heavy  responsibility  may  rest  upon  his  shoulders  from  the 
danger  of  loss  through  sudden  shrinkage  in  the  value  of  collaterals. 
He  should  in  times  of  quiet  and  prosperity  get  rid  of  all  securities  of 
questionable  value,  and  not  wait  until  the  storm  breaks  which  may 
make  such  a  course  impossible.  If  a  loan  is  unsatisfactory  it  may 
be  called  or  the  deposit  of  additional  collateral  may  be  required  in- 
stead. When  funds  are  needed,  it  is  his  duty  to  call  loans  in  order 
to  replenish  the  company's  reserve. 

The  treasurer  is  responsible  for  the  systems  employed  in  his 
department  in  the  receipt,  payment,  and  care  of  deposits,  and  in  the 
handling  of  loans.  To  settle  the  technical  questions  which  con- 
stantly arise,  he  requires  a  good  knowledge  of  banking  principles 
and  usage.  His  close  contact  with  the  details  of  the  business,  and 
the  number  of  customers  whom  he  meets,  make  this  officer  of  con- 
siderable assistance  to,  his  superiors  when  considering  the  effect  of 
possible  changes  in  policy  or  methods. 

The  treasurer  also  comes  into  close  relations  with  the  office  force, 
and  has  it  in  his  power  to  do  much  toward  upholding  a  high  standard 
of  service.  He  usually  pays  the  salaries,  and  not  infrequently  acts 
as  purchasing  officer,  has  charge  of  the  company's  building,  attends 
to  the  advertising,  the  bonding  of  employees,  and  similar  administra- 
tive duties.  In  fact,  his  office  often  seems  a  convenient  place  to 
which  to  refer  all  matters  not  belonging  to  any  particular  depart- 
ment. 

In  smaller  trust  companies,  the  positions  of  vice-president  and 
treasurer,  or  secretary  and  treasurer,  are  frequently  combined.  In 
larger  institutions,  there  are  usually  one  or  more  assistant  treasurers. 

SECRETARY 

The  bank  cashier  acts  as  secretary  at  board  meetings,  and  con- 
sequently an  officer  with  the  title  of  secretary  does  not  appear  in  the 
plan  of  organization  of  either  state  or  national  banks. 

Trust  companies,  occupying  a  broader  field  and  doing  more 
varied  business  than  strictly  banking  corporations,  find  it  necessary 
to  have  a  larger  corps  of  officers.  The  secretary  —  who  is  found  in 
almost  every  corporate  organization  except  the  bank  —  is  the  logical 
addition  to  the  executive  force.  He  is  not  a  mere  amanuensis  or 


38  THE  MODERN  TRUST  COMPANY 

recording  clerk,  but  an  officer  performing  varied  and  important 
duties. 

The  by-laws  of  most  corporations,  whether  mercantile  or  financial, 
provide  that  the  duties  of  the  secretary  shall  include  keeping  the 
minutes  of  the  board  and  of  its  committees,  the  custody  of  the  cor- 
porate seal,  and  the  attestation  of  all  documents  to  which  the  seal 
is  affixed.  Upon  him  as  secretary  of  board  and  committee  meetings 
the  correspondence  resulting  from  action  taken  by  these  bodies 
naturally  devolves.  The  secretary  sends  out  notices  of  stockholders', 
board,  and  committee  meetings,  prepares  the  order  of  business,  — 
usually  fixed  by  the  by-laws,  —  and  aids  the  presiding  officer  in  the 
conduct  of  the  meeting. 

The  general  correspondence  of  the  company  is  received  by  the 
secretary  or  by  assistants  detailed  for  this  purpose  under  his  direction. 
Where  a  general  correspondence  room  is  maintained,  the  secretary 
is  the  officer  upon  whom  the  oversight  and  direction  of  this  depart- 
ment naturally  fall.1 

In  a  small  trust  company  the  title  of  secretary  is  often  combined 
with  that  of  treasurer  or  trust  officer,  as  the  duties  belonging  strictly 
to  the  secretary  are  not  enough  to  fill  the  time  of  a  high-salaried 
official.  Whatever  the  combination  of  duties,  it  is  well  to  have  a 
secretary  and  assistant  secretary,  so  that  there  may  always  be  some 
one  at  hand  who  can  attest  the  seal  when  attached  to  official 
documents. 

Keeping  the  minutes  may  be  an  onerous  task  in  large  corpora- 
tions, where  many  matters  come  before  the  board  for  consideration. 
The  writing  of  minutes  by  hand,  when  the  hand  is  that  of  a  well- 
paid  officer,  is  a  waste  of  time  and  an  unsatisfactory  method  of 
keeping  important  books  of  record.  The  secretary  should  make 
short  notes  at  the  meeting,  and  immediately  after  its  adjourn- 
ment, while  his  impressions  are  fresh,  should  dictate  the  minutes 
in  full  to  a  stenographer.  They  should  be  typewritten  on  loose 
sheets  of  a  suitable  size,  ruled  with  a  single  vertical  line  to  give 
a  margin  at  the  left-hand  side.  After  examination,  the  minutes 
should  be  signed  by  the  secretary,  and  placed  in  a  file  or  binder.  At 
the  end  of  each  year,  or  other  regular  period,  the  sheets  should  be 
removed  from  the  file  and  permanently  bound.  They  should  be 

1  For  description  of  correspondence  room,  see  p.  249. 


OFFICERS  39 

numbered  consecutively,  and  a  careful  index  should  be  prepared 
and  bound  with  each  volume. 

Long  and  formal  resolutions,  such  as  those  authorizing  the  sale  of 
real  estate,  with  lengthy  descriptions  of  the  properties  conveyed,  may 
be  simply  noted  and  a  supplemental  book  kept,  in  which  the  resolu- 
tions are  filed.  This  makes  it  easier  to  refer  to  the  general  minutes, 
as  well  as  to  find  the  special  records  thus  grouped. 

Copies  of  the  by-laws  and  of  resolutions  conferring  general  powers 
on  officers  are  frequently  needed,  and  a  supply  of  these  should  be 
printed  and  kept  on  hand,  in  such  form  that  when  certification  is 
necessary  the  secretary  may  be  able  to  add  the  seal  and  his  attesta- 
tion without  delay. 

MANAGER  OF  CORPORATE  TRUST  DEPARTMENT 
(TRUST  OFFICER) 

The  executive  head  of  the  department  responsible  for  corporate 
trust  business  is  known  by  various  titles,  and  is  often  one  of  the  vice- 
presidents.  Whether  he  occupies  a  more  responsible  post  than  the 
head  of  the  individual  trust  department  depends  entirely  on  the  rela- 
tive importance  of  the  departments  and  the  amount  of  business  each 
transacts.  The  two  departments  are  in  some  instances  combined 
under  one  head,  and  when  the  business  is  small  two  separate  organi- 
zations would  not  be  justified.  In  Massachusetts  trust  companies  are 
found  which,  to  avoid  hampering  restrictions,  have  never  applied  for 
the  power  to  act  as  executor  or  trustee  for  individuals,  and  hence 
have  no  individual  trust  department,  but  devote  all  their  energies 
to  corporation  work. 

The  corporate  trust  department  is  called  upon  to  perform  the 
duties  of  the  trust  company  in  a  number  of  capacities.  When  the 
company  is  a  trustee  for  bond  issues  the  head  of  the  corporate  trust 
department  has  charge  of  the  securities  and  records  relating  to  the 
bonds  received,  issued,  and  cancelled.  He  conducts  the  correspond- 
ence and  in  the  event  of  default  he  may  have  to  take  charge  of  fore- 
closure proceedings  or  other  legal  measures  for  the  protection  of  the 
bondholders. 

The  manager  of  the  corporate  trust  department  has  charge  of  the 
business  of  the  trust  company  in  its  capacity  of  fiscal  agent  of  corpo- 


40  THE  MODERN  TRUST  COMPANY 

rations.  This  includes  the  payment  of  interest  on  registered  and 
coupon  bonds,  of  dividends  on  capital  stock,  and  at  times  of  the 
principal  of  bonds  and  other  obligations.  The  collection  and  disburse- 
ment of  funds  often  bring  the  trust  company  into  close  relation  with  a 
wide  range  of  interests,  and  the  success  attending  its  work  rests 
largely  upon  the  tact,  foresight,  and  energy  displayed  by  the  manager 
of  this  department. 

The  registration  and  transfer  of  the  shares  of  stock  of  other  cor- 
porations form  an  important  part  of  a  trust  company's  duties.  This 
work  must  be  handled  expeditiously  and  important  decisions  must 
frequently  be  made  by  the  manager  of  the  corporate  trust  department. 
To  discharge  these  duties  properly  he  needs  to  be  thoroughly  familiar 
with  the  practices  relating  to  the  transfer  of  stock,  and  he  should 
be  acquainted  with  the  laws  and  decisions  of  the  courts  upon  the 
subject. 

When  the  trust  company  is  chosen  as  manager  of  an  underwriting 
syndicate,  when  it  is  designated  as  depositary  under  plans  of  reorgani- 
zation of  a  corporation,  or  when  it  becomes  either  assignee  or  re- 
ceiver of  an  individual,  firm,  or  corporation,  the  manager  of  the 
corporate  trust  department  must  assume  responsibilities  requiring  a 
high  order  of  ability  coupled  with  fairness  and  patience  in  dealing 
with  the  complicated  problems  that  are  sure  to  arise. 

MANAGER  OF   INDIVIDUAL  TRUST  DEPARTMENT 
(TRUST  OFFICER) 

When  the  company  does  a  large  individual  trust  business,  the 
trust  officer  is  the  most  sought-after  man  in  the  organization.  Guide, 
philosopher,  and  friend,  he  touches  in  the  most  intimate  way  the 
lives  and  the  fortunes  of  those  whose  affairs  he  may  control.  He 
sees  the  family  in  its  joys,  its  sorrows,  and  its  disagreements,  and, 
like  the  doctor  and  the  priest,  his  advice  and  help  are  sought  in  every 
dilemma.  Small  wonder  that  he  must  be  possessed  of  infinite  patience, 
of  wisdom,  of  firmness  tempered  by  charity ;  that  he  must  learn  how 
to  say  no  without  offending,  how  to  make  a  refusal  seem  almost  a 
favor. 

Trust  business  is  governed  by  law  at  every  turn,  so  the  trust 
officer  must  either  be  a  lawyer  himself  or  have  some  one  to  whom  he 


OFFICERS  41 

can  readily  apply  for  legal  advice.  Most  trust  officers  are  members  of 
the  bar,  but  there  are  notable  exceptions.  Long  association  with  court 
practice  and  familiarity  with  the  business  may  make  a  layman  as 
successful  a  trust  officer  as  the  most  accomplished  lawyer.  A  general 
counsel  who  is  easily  accessible  can  supply  the  needed  legal  advice, 
and  gradually  impart  a  working  knowledge  of  legal  principles  to  the 
officer  unlearned  in  the  law.  It  is  also  the  custom  to  employ  as  special 
counsel  for  each  estate  the  lawyer  who  brings  the  business  to  the  trust 
company,  or  who  is  chosen  by  the  parties  in  interest,  and  he  will 
usually  prefer  to  be  consulted  before  decisions  of  moment  are  made. 
If  a  lawyer  is  appointed  as  trust  officer,  he  should  be  a  man  of  high 
professional  standing,  for  his  decisions  are  liable  to  review  by  the 
courts,  and  may  have  far-reaching  effects.  A  capable  layman  is 
far  safer  than  a  second-rate  lawyer. 

To  be  successful,  the  trust  officer  must  have  full  authority  over 
his  department,  and  be  assured  of  the  cordial  support  of  his  superiors. 
This  support  is  particularly  necessary  because  in  the  interpretation  of 
testamentary  and  other  directions  he  has  to  act  in  an  almost  judicial 
capacity,  and  appeals  may  often  be  taken  from  the  decisions  he 
makes  in  carrying  out  the  provisions  of  wills  and  deeds  of  trust,  or 
the  instructions  of  the  courts.  The  president  and  directors  fix  the 
general  terms  on  which  trust  business  is  to  be  taken,  and  the  pre- 
liminary arrangements  are  often  made  by  the  president  himself  ;  but 
the  account  when  accepted  is  entirely  in  the  hands  of  the  trust  officer. 
Investments  are  also  usually  made  by  the  president  and  directors, 
subject  to  legal  restrictions.  The  trust  officer,  however,  owing  to 
his  familiarity  with  the  needs  of  each  case,  is  best  fitted  to  assign 
the  investments  to  the  individual  accounts. 

In  smaller  companies,  the  position  of  the  trust  officer  is  often 
combined  with  that  of  vice-president,  secretary,  or  treasurer.  As 
soon  as  the  volume  of  business  will  warrant  it,  the  trust  officer  should 
be  relieved  of  all  duties  outside  his  department,  and  when  necessary 
he  should  be  given  one  or  more  assistants,  who  can  take  charge  of 
the  various  details  of  the  trust  business  and  exercise  his  authority 
when  absent.  The  trust  officer  should  keep  track  of  all  new  busi- 
ness and  have  his  department  so  thoroughly  organized  that  each 
transaction  will  naturally  fall  into  its  proper  channel.  In  no  part 
of  a  trust  company's  business  are  the  details  so  many  or  so  diverse, 


42  THE  MODERN  TRUST  COMPANY 

and  in  none  is  it  more  necessary  to  keep  the  confidence  ancf 
good-will  of  the  customer  by  having  them  regularly,  promptly, 
and  carefully  attended  to.  A  successful  trust  officer  has  said  that 
his  most  important  function  is  to  plan  such  accurate  systems  that 
when  a  piece  of  business  leaves  his  desk  the  details  are  provided  for 
automatically. 

The  personality  of  the  trust  officer  is  the  chief  factor  in  estab- 
lishing and  maintaining  pleasant  relations  between  the  trustee  and 
the  cestui  que  trust.  He  should  be  readily  accessible  and  always 
willing  to  listen  to  requests  and  complaints,  and  yet  he  should  not 
allow  his  visitors  to  take  too  much  of  his  time.  He  has  to  consider 
separately  the  varying  problems  of  each  estate;  how  to  secure  the 
largest  income  returns,  when  to  buy  and  when  to  sell,  how  to  recon- 
cile diverse  interests  and  conserve  the  rights  of  both  life  tenant  and 
remainderman.  When  the  opinion  of  counsel  and  of  experts  must 
be  obtained  before  difficult  problems  can  be  settled,  it  falls  to  him 
to  convince  even  the  most  impatient  parties  in  interest,  of  the  neces- 
sity for  delay.  From  all  his  subordinates  he  should  require  the 
prompt  despatch  of  business,  with  unfailing  courtesy  and  considera- 
tion. Especially  upon  his  assistants  who  may  have  to  be  sent  into 
the  homes  of  clients  should  he  impress  the  necessity  of  gentlemanly 
dress  and  behavior.  The  very  nature  of  the  business  is  confiden- 
tial, and  he  cannot  lay  too  great  stress  on  the  duty  of  every  employee 
to  regard  as  private  all  information  coming  through  trust  company 
channels. 

The  trust  officer,  if  he  can  demonstrate  his  ability  to  safeguard 
the  interests  of  those  with  whom  he  has  to  deal,  has  rare  opportuni- 
ties to  win  their  confidence  and  esteem,  and  through  them  to  attract 
others  to  his  company.  He  is  also  in  a  position  to  secure  new  busi- 
ness by  maintaining  cordial  relations  with  the  members  of  the  bar 
and  the  judiciary. 


CHAPTER   IV 

BANKING  DEPARTMENT 

ORGANIZATION 

THE  wide  powers  exercised  by  trust  companies,  and  their  freedom 
in  many  states  from  restrictions  in  regard  to  keeping  a  fixed  reserve  to 
secure  deposits,  have  brought  about  a  remarkable  expansion  in  the 
strictly  banking  functions  of  these  institutions  in  recent  years.  The 
trust  companies  have  entered  into  active  competition  with  the  banks 
in  securing  deposit  accounts,  and  by  paying  interest  on  daily  balances 
they  have  been  successful  in  attracting  an  immense  amount  of 
business.  If  credit  is  not  a  requirement  of  the  depositor,  and  the 
slight  delay  caused  by  having  collections  pass  through  two  hands 
is  not  of  vital  importance,  the  service  rendered  is  as  good  as  that 
of  the  national  or  state  bank.  In  some  states  where  broad  powers 
are  granted  under  a  general  banking  law  —  such  as  that  of  Illinois 
—  one  finds  the  same  companies  doing  a  trust  business  and  carrying 
on  commercial  banking  in  its  various  branches  as  well. 

The  large  sums  on  deposit  in  trust  companies  have  given  these 
institutions  a  commanding  position.in  commercial  development,  and 
in  the  promotion  of  all  sorts  of  enterprises.  Sox  important  has  the 
field  occupied  by  the  trust  companies  become,  that  the  bank  statement 
of  most  of  our  larger  cities  has  lost  some  of  its  old-time  significance 
because  it  shows  but  indirectly  the  enormous  transactions  of  the 
trust  companies  which  are  simply  depositors  of  and  clear  through 
the  banks.  New  York  has  recently  adopted  the  plan  of  publishing 
a  combined  weekly  statement  of  both  banks  and  trust  companies. 
Such  combined  statements  should  be  made  in  all  large  financial 
centres  in  order  to  convey  the  full  and  definite  information  originally 
intended  to  be  given  by  the  bank  statements. 

43 


44  THE  MODERN  TRUST  COMPANY 

Banking  functions  occupy  the  principal  attention  of  the  large 
New  York  trust  companies.  The  floating  of  bond  issues  and  finan- 
cing of  corporations  of  all  sorts  have  opened  up  a  profitable  use  for 
their  deposits  and  enabled  these  companies  to  offer  great  induce- 
ments to  the  depositor  in  the  way  of  interest.  Even  in  other  parts  of 
this  country,  where  the  care  of  individual  estates  forms  a  lucrative 
part  of  the  trust  companies'  business,  their  banking  functions  are 
so  important  and  varied  that  they  deserve  careful  consideration. 

The  treasurer  is  the  executive  officer  of  the  banking  department, 
and  is  directly  responsible  for  its  management.1  The  clerical  work 
of  the  department  may  be  divided  into  — 

I.   The  receipt  of  deposits Receiving  teller 

II.   The  disbursement  of  deposits    ....  Paying  teller 

III.  The  care  of  deposits  .        .        .    Individual  depositors' bookkeeper 

IV.  The  use  of  deposits Loans 


RECEIVING  TELLER 

The  receiving  teller  is  responsible  for  the  receipt  of  all  items, 
whether  cash,  notes,  checks,  or  other  forms  of  indebtedness  taken  for 
deposit.  He  is  responsible  for  the  work  and  conduct  of  his  assistants. 

He  should  be  a  man  of  undoubted  honesty,  good  address,  obliging 
yet  firm.  He  should  always  make  the  depositor  —  whether  capital- 
ist or  office  boy  —  feel  that  he  is  welcome,  and  by  courtesy  and 
kindness  do  all  in  his  power  to  keep  the  good-will  of  his  customers. 
The  paying  and  receiving  tellers  can  by  their  manners  do  more  to 
attract  or  drive  away  business  than  any  other  individuals  in  the 
employ  of  the  department.  A  conscientious  treasurer  in  his  private 
office  is  well-nigh  helpless  to  counteract  a  bad  impression  made  on 
customers  by  his  representatives  behind  the  grills.  It  therefore  be- 
hooves the  appointing  officer  to  exercise  the  greatest  care  in  the 
selection  of  the  tellers,  and  to  impress  on  them  the  importance  of 
their  position,  and  the  direct  bearing  of  their  actions  on  the  success 
of  the  entire  organization. 

As  the  duties  of  the  receiving  teller  include  the  most  careful  scrutiny 
of  every  item  which  passes  through  his  hands,  and  as  there  is  con- 
siderable mental  strain  in  performing,  often  under  pressure,  such 

1  For  details  of  treasurer's  functions  and  duties,  see  p.  36. 


BANKING   DEPARTMENT  45 

responsible  work,  it  is  essential  that  the  machinery  of  this  division 
should  be  as  simple  as  is  consistent  with  safety,  and  that  all  unneces- 
sary clerical  work  should  be  avoided. 

The  depositor  is  required  to  fill  out  a  deposit  slip,  giving  the 
title  of  the  account,  the  date  and  particulars  of  the  deposit.  It  is 
the  duty  of  the  receiving  teller  to  verify  the  facts  and  figures  on  the 
slip  before  entering  the  amount  of  the  deposit  in  the  pass  book.  He 
should  always  be  careful  to  see  that  the  title  of  the  account  is  accu- 
rately and  clearly  written,  for  all  subsequent  entries  are  made  from 
this  original  record,  and  an  incorrect  or  illegible  slip  may  cause  a 
series  of  errors. 

Banks  and  trust  companies  always  provide  their  customers  with 
deposit  slips,  partly  for  the  convenience  of  the  depositor,  but  even 
more  to  facilitate  the  clerical  work  of  the  company.  The  slip,  made 
out  by  the  depositor  or  his  representative,  serves  as  the  customer's 
description  of  the  deposit,  and  may  be  of  value  in  case  of  dispute. 
It  is  therefore  always  well  to  use  the  depositor's  memorandum,  even 
though  written  on  a  rough  bit  of  paper,  rather  than  to  destroy  this 
piece  of  evidence  and  replace  it  by  one  of  the  usual  slips  filled  out 
by  an  employee  of  the  company.  For  convenience  in  verifying  deposits, 
the  customer  is  required  to  specify  the  total  amount  of  notes  and  of 
specie,  and  to  list  separately  the  various  other  items. 

The  description  showing  the  place  of  payment  of  the  separate 
checks  is  useful  in  enabling  the  teller  to  judge  how  soon  a  depositor 
who  carries  a  small  balance  can  be  permitted  to  draw  against  recently 
made  deposits.  It  also  helps  to  identify  the  item  in  case  a  check 
is  lost.  If  a  depositor  carries  a  large  balance,  it  is  enough  to  list 
the  amount  of  each  item  without  any  further  description,  for  the  in- 
dorsement of  a  check  would  show  to  what  account  it  had  been  cred- 
ited in  case  it  should  be  returned  unpaid.  Some  institutions  itemize 
on  their  deposit  slips  each  denomination  of  note  and  specie.  Except 
in  very  large  deposits,  this  retards  rather  than  facilitates  the  work  of 
the  teller.  A  special  form  of  deposit  slip  is  often  used  for  the  deposit 
of  coupons  as  cash  items.  Coupons  have  to  be  examined  with  espe- 
cial care  and  the  separate  slip  saves  the  tellers  the  annoyance  of 
having  them  indiscriminately  listed  with  cash  and  checks.  As  a 
matter  of  convenience,  coupons  are  often  received  for  deposit  at  the 
collection  window. 


46  THE  MODERN   TRUST  COMPANY 

After  verifying  the  separate  items  of  a  deposit,  the  teller  enters 
the  total  in  the  depositor's  pass  book.  The  pass  book  should  be  of 
a  size  convenient  to  carry  in  the  pocket — 6J"x4j"  outside  measure- 
ments has  been  found  a  satisfactory  shape.  On  the  outside  cover, 
made  of  leatherette,  cloth,  or  tough  manila,  should  be  a  space  for  the 
depositor's  name.  The  title  of  the  company  should  then  follow.  If 
the  name  of  the  depositor  is  at  the  top,  the  books  can  be  stacked 
like  a  card  index  and  most  easily  handled. 

Inside  the  cover  it  is  usual  to  find  one  or  more  printed  pages, 
reciting  the  terms  on  which  deposits  are  taken.  The  front  pages  and 
back  cover  of  the  pass  book  are  also  convenient  spaces  for  advertis- 
ing the  company.  The  blank  pages  of  the  pass  book  should  contain 
a  date  column,  a  column  for  description  of  the  deposit,  and  a  cash 
column.  Both  right  and  left  hand  pages  should  be  ruled  alike,  faint 
cross  lines  about  J"  apart  serving  to  guide  the  teller  in  entering  de- 
posits. Now  that  it  has  become  the  custom  to  list  paid  checks  on  an 
adding  machine,  both  right  and  left  pages  are  used  for  entering  de- 
posits. When  a  settlement  is  made,  the  balance  at  last  settlement 
and  the  deposits  are  totalled,  and  from  this  amount  the  total  of  checks 
shown  by  the  adding  machine  list  is  deducted.  Subsequent  deposits 
are  entered  below  the  resulting  balance.  From  twenty-five  to  fifty 
double  pages  are  ample  for  the  ordinary  pass  book.  Experience  has 
shown  that  larger  books  are  unwieldy  and  are  likely  to  wear  out 
before  they  are  filled. 

When  deposits  are  made  without  the  pass  book,  the  teller  should 
stamp  the  slip  "No  Book,"  and  later,  when  the  book  is  presented  for 
settlement,  or  for  the  addition  of  the  omitted  deposit,  the  slip  should 
be  initialled  by  the  teller  after  the  entry  is  made. 

Where  two  or  more  depositors'  ledgers  are  kept,  the  teller  should 
separate  the  slips  belonging  to  the  different  ledgers.  Several  times 
during  the  day  his  files  of  deposit  slips  should  be  emptied,  each  lot 
listed  on  an  adding  machine,  and  the  slips  then  turned  over  to 
the  bookkeepers  for  posting.  The  teller's  totals  of  the  deposit  slips 
settle  at  the  end  of  the  day  with  the  totals  of  the  bookkeepers' 
scratchers. 

All  checks  on  other  institutions  are  listed  and  then  either  sent 
directly  to  bank  or  passed  over  to  the  paying  teller's  department  for 
verification  and  deposit.  It  is  a  common  practice  to  have  all  of  the 


RECEIVING,  TELLER'S  iDAILY  SETTLEMENT, 

RECEIPTS 

Individual  Depositors,  - 

A  -.F 

G--.H* 

O  -  Z 

Certificates  of  Deposit 

Certified  Checks 

Demand  Loans 

Time  Loans 

Commercial  Paper 

Stocks 

Bonds 

Mortgages 

Accrued  Interest  Receivable 

Safe  Deposit  Rentals 

Total 

DISBURSEMENTS 

Payments  to  Paying  Teller, 

Notes 

Specie 

Checks 

Total 

47 


48  THE   MODERN   TRUST   COMPANY 

company's  deposits  in  other  banks  made  by  the  paying  teller  and  to 
have  the  receiving  teller's  total  included  in  the  paying  teller's  settle- 
ment. Checks  on  the  company  itself  are  passed  over  to  the  paying 
teller  and,  if  good,  the  receiving  teller  is  given  a  due  bill  covering 
them. 

The  receiving  teller's  work  is  settled  at  the  end  of  the  day  in  the 
receiving  teller's  settlement  book.  One  page  of  this  book  is  devoted 
to  each  day's  work.  A  list  of  the  more  active  general  ledger  accounts 
is  printed,  as  a  matter  of  convenience,  while  a  few  blank  spaces  fol- 
lowing this  list  leave  room  for  such  accounts  as  appear  but  seldom. 
Following  the  list  of  receipts,  divided  according  to  the  general  ledger 
accounts,  appear  the  payments  to  paying  teller,  divided  into  notes, 
specie,  and  checks.  The  totals  of  both  lists  must  settle,  just  as  the  total 
of  the  deposits  received  must  balance  with  the  depositors'  scratchers 
kept  by  the  bookkeepers.  It  is  customary  for  the  receiving  teller 
to  give  his  figures  to  the  paying  teller  at  the  end  of  the  day,  but  not 
to  turn  over  the  specie  and  notes  until  the  following  morning,  when 
the  paying  teller  can  prove  the  cash  at  his  leisure. 

Items  which  cannot  be  taken  as  cash,  such  as  notes,  drafts,  and 
obligations  of  every  sort  not  due  when  deposited  or  of  uncertain  pay- 
ment, are  taken  for  collection.  There  is  often  a  separate  teller  who 
has  charge  of  this  class  of  deposits  and  who  sometimes  also  receives 
coupons  and  other  items  not  strictly  cash. 

All  items  received  for  collection  are  entered  "  short "  in  the  deposi- 
tor's pass  book.  That  is,  a  description  of  the  deposit,  including 
the  amount  if  it  is  known,  is  written  in  the  description  column 
of  the  book  only,  the  amount  not  being  "extended"  or  placed  in 
the  cash  column  until  the  item  has  been  actually  paid  and  the  pro- 
ceeds have  been  placed  to  the  depositor's  credit  on  the  ledger. 

If  a  trust  company  does  a  commercial  banking  business  it  should 
furnish  each  depositor  who  has  a  large  number  of  items  for  collection 
with  a  separate  pass  book  in  which  the  teller  in  charge  of  the 
collection  window  can  list  all  such  items  when  deposited.  As  each 
item  is  paid  it  is  crossed  off  this  book  and  entered  in  the  depositor's- 
regular  pass  book. 

A  trust  company  either  makes  collections  directly  through  its 
correspondents  in  various  parts  of  the  country,  or  deposits  its  collec- 
tion items  in  a  local  bank.  In  the  latter  case,  as  each  item  is  paid 


BANKING  DEPARTMENT  49 

it  is  crossed  out  in  the  company's  collection  pass  book,  the  proceeds 
are  placed  to  the  credit  of  the  trust  company's  deposit  account,  and 
the  corresponding  entry  is  made  in  the  regular  pass  book.  The 
trust  company  has  to  keep  a  record  of  collections  in  which  each  item 
is  entered  as  received  from  the  depositor,  and  a  card  index  on  which 
the  items  are  arranged  according  to  the  date  when  due  or  payable. 
The  record  of  collections  can  be  either  a  loose  leaf  or  bound  book. 
Each  line  can  be  numbered  so  that  the  items  may  be  treated  on  the 
maturity  index  by  their  accession  number,  thus  often  avoiding  the 
repetition  of  a  long  description.  One  line  should  usually  be  suf- 
ficient for  each  item.  The  record  should  contain  the  following  data : 
date  received,  date  due,  name  of  depositor,  nature  of  obligation, 
description,  number  of  items,  amount  of  each,  deductions,  total 
amount,  where  payable,  date  deposited,  how  collected,  date  paid, 
remarks.  As  the  items  are  paid,  they  are  checked  off  so  that  the 
outstanding  items  can '  be  seen  at  a  glance. 

The  maturity  index  should  be  kept  on  cards.  It  is  simply  a  cross 
index  of  the  open  items  in  the  collection  record,  arranged  as  to  dates. 
The  cards  should  be  ruled  so  as  to  show  the  item  number,  descrip- 
tion, due  date,  and  amount.  Guide  cards  divide  the  index  into  the 
days  of  the  current  month,  the  following  eleven  months,  and  sub- 
sequent years.  Overdue  items  should  be  kept  in  front.  The  index 
should  be  examined  each  morning  and  the  current  guide  cards 
moved  so  that  it  will  always  show  the  exact  condition  of  the  items 
out  for  collection. 

As  soon  as  an  item  is  paid,  it  is  noted  in  the  collection  record,  a 
deposit  slip  is  made  out,  the  amount  is  passed  to  the  credit  of  the 
proper  depositor,  and  the  maturity  index  card  is  destroyed. 

It  is  a  growing  practice  for  depositors  to  leave  for  deposit  coupons 
which  mature  at  various  future  dates.  These  are  entered  short  in 
the  depositor's  book  and  are  treated  exactly  like  other  collection 
items,  except  that  at  maturity  they  are  usually  put  through  as  cash. 
In  other  words,  they  are  entered  in  the  collection  record  as  paid  on 
the  day  on  which  they  are  deposited  in  bank  by  the  trust  company, 
and  the  depositor  is  given  credit  at  that  time.  As  the  larger  part  of 
the  work  can  be  done  in  advance  and  the  items  can  be  examined  at 
leisure,  this  practice  is  encouraged  for  the  convenience  of  all  con- 
cerned. It  is  usual  for  the  trust  companies  to  deposit  coupons  in 


50  THE  MODERN  TRUST  COMPANY 

bank  one  or  two  days  before  they  are  due,  to  get  these  troublesome 
items  out  of  the  way  before  the  first  of  the  month.  Bonds  which 
have  been  called  for  payment  or  which  have  matured  are  treated  in 
the  same  way  as  coupons.  The  teller  in  charge  of  the  coupon  and 
collection  window  should  keep  himself  informed  as  to  where  coupons 
and  bonds  are  payable,  should  have  lists  of  called  bonds  easily  acces- 
sible, and  full  information  as  to  defaults,  reorganizations,  etc.  In 
this  way  he  can  render  much  appreciated  service  to  depositors  and 
prevent  the  return  of  many  items  deposited  through  carelessness  or 
ignorance.  Dividend  orders  and  orders  for  the  payment  of  regis- 
tered interest  should  also  be  carefully  examined  and  when  there  is 
any  possibility  of  non-payment  should  have  "No  Protest"  slips 
attached. 

Great  care  should  be  exercised  in  receiving  notes  and  other  nego- 
tiable instruments,  and  informalities  should  be  detected  and  rectified 
at  the  time  of  deposit.  Future  trouble  with  depositors  can  also  be 
avoided  by  asking  for  explicit  instructions  as  to  whether  the  obliga- 
tion is  to  be  protested  if  not  paid. 

Some  depositors  make  a  practice  of  drawing  on  their  customers 
whose  accounts  are  overdue.  Such  items  are  often  troublesome 
and  are  frequently  returned  unpaid.  They  should  under  no  circum- 
stances be  accepted  as  cash.  Indeed,  business  of  this  sort  can 
usually  be  refused,  unless  the  company  is  doing  a  commercial 
banking  business,  in  which  case  the  depositor  should  pay  for  the 
service  rendered. 

"This  book  must  accompany  each  deposit,"  was  a  familiar  legend 
in  the  pass  books  of  a  few  years  ago,  but  the  rule  is  now  "more  hon- 
ored in  the  breach  than  in  the  observance."  The  practice  of  mail- 
ing dividend  and  interest  checks,  and  the  competition  for  deposits, 
have  led  many  companies  to  offer  special  facilities  for  doing  a  mail 
business,  and  attractive  circulars  are  issued  giving  instructions  as  to 
the  necessary  procedure  in  "Banking  by  Mail."  Deposit  slips  and 
addressed  envelopes  are  furnished  the  depositors,  and  the  receipt  of 
each  deposit  is  promptly  acknowledged.  The  bank  book  is  generally 
left  at  the  company's  office  for  safe-keeping.  The  account  is  set- 
tled either  when  the  interest  is  allowed,  or  at  other  fixed  times,  and 
the  book  itself  or  an  abstract  of  the  account  is  sent  with  the  cancelled 
checks.  Some  companies  take  the  precaution  of  having  all  mail 


BANKING  DEPARTMENT  51 

deposits  received  and  acknowledged  in  the  treasurer's  office  before 
the  items  are  passed  over  to  the  receiving  teller.  In  other  companies 
these  deposits  are  addressed  to  the  receiving  teller  and  are  acknowl- 
edged by  him. 

THE   PAYING  TELLER 

What  has  been  said  in  regard  to  the  responsibilities  of  the  receiv- 
ing teller  applies  with  even  more  force  to  the  man  at  the  other  window. 
The  duties  of  both  tellers  have  much  in  common,  but  there  is  one 
great  difference ;  it  is  often  possible  for  the  receiving  teller  to  locate 
and  rectify  an  error  made  in  the  receiving  of  a  deposit,  while  the 
paying  teller  has  no  way  of  correcting  a  mistake  after  the  cash  is 
paid  out. 

The  position  is  at  best  a  difficult  one,  and  it  is  a  matter  of  econ- 
omy, if  nothing  more,  to  make  such  arrangements  that  the  paying 
teller  can  keep  his  mind  on  his  immediate  duties  and  be  free  from 
any  other  responsibilities  or  distractions.  His  patience  is  often  and 
severely  taxed  by  unpleasant  customers,  and  this  fact  should  be 
borne  in  mind  by  the  superior  officer  when  listening  to  complaints 
and  appeals  from  the  teller's  decisions. 

"You  will  have  to  be  identified,  Madam,  before  I  can  pay  this 
check,  for  I  do  not  know  you,"  has  been  known  to  provoke  the 
retort,  "Well,  I'm  sure  I  don't  know  you,  and  what's  more  I  don't 
want  to!" 

A  paying  teller's  life  is  not  all  difficulty,  however.  The  position 
is  one  of  responsibility,  to  be  sure ;  but  the  hours  are  short,  there  are 
many  periods  of  enforced  leisure,  and  there  are  more  pleasant  cus- 
tomers than  unreasonable  ones.  Each  day's  work  stands  for  itself, 
and  with  the  cash  once  settled  there  is  no  more  thought  or  care  till 
the  morrow's  business  commences. 

It  is  important  that  the  paying  teller  should  be  able  to  handle 
notes  and  coin  rapidly  and  accurately,  that  he  should  be  able  to 
detect  counterfeits,  and  to  make  rapid  mental  calculations.  A  good 
memory  for  both  faces  and  names  is  of  inestimable  service  to  him. 

The  paying  teller  should  know  that  he  has  the  unqualified  sup- 
port of  his  superior  officers,  and,  on  the  other  hand,  he  should  be 
made  to  realize  the  necessity  of  considerate  and  gentlemanly  treat- 
ment of  all  customers. 


52  THE   MODERN  TRUST  COMPANY 

The  treasurer  should  see  that  the  teller  is  provided  with  an  ample 
supply  of  the  various  denominations  of  coins  and  notes.  Assistance 
should  also  be  given  him  in  putting  up  small  denominations  of  coin. 
There  are  now  on  the  market  several  satisfactory  mechanical  devices 
for  counting  and  wrapping  coin,  which  save  labor  and  prevent  the 
possibility  of  miscounts.  The  mechanical  trays  for  use  in  making 
combinations  of  coin  provide  a  rapid  and  accurate  means  of  count- 
ing out  small  lots  of  specie. 

New  money,  both  coin  and  notes,  is  now  very  largely  used,  par- 
ticularly in  trust  companies,  some  institutions  even  advertising  that 
they  pay  out  no  old  currency.  New  notes  are  more  difficult  for  the 
teller  to  handle  than  old  ones,  but  they  should  be  provided  for  all 
customers  who  desire  them,  and  a  little  foresight  will  usually  make  it 
possible  to  keep  an  adequate  supply  on  hand.  If  they  cannot  be 
obtained  from  local  institutions,  the  Treasury  Department  at  Wash- 
ington can  generally  fill  the  order,  charging  only  the  cost  of  express- 
age.  There  is  always  a  great  demand  for  new  money  just  before 
Christmas,  and  an  extra  supply  should  be  ready  in  time. 

The  paying  teller,  by  the  exercise  of  a  little  tact  and  patience,  can 
gradually  educate  the  depositor  to  help  rather  than  retard  his  work. 
Thus,  employers  can  usually  be  prevailed  on  to  send  memoranda  of 
their  pay-rolls  in  advance,  so  that  the  money  can  be  put  up  before 
or  after  hours  —  for  nothing  is  more  maddening  to  a  line  of  cus- 
tomers than  to  be  kept  waiting  while  a  long  and  difficult  order  is 
being  filled.  Many  banks  and  trust  companies  now  provide  printed 
slips  to  be  used  in  specifying  how  pay-rolls  shall  be  put  up.  Both 
to  save  time  and  to  help  in  tracing  differences  the  teller  should 
encourage  the  depositor  to  list  on  a  slip  or  on  the  back  of  his  check 
the  denominations  desired. 

The  teller  has  yet  to  be  found  who  does  not  occasionally  settle 
"short,"  or,  less  frequently,  "over."  Differences  should,  however, 
occur  but  seldom  if  the  teller  exercises  due  care  and  is  provided  with 
the  necessary  safeguards  to  locate  responsibility.  Such  seemingly 
slight  details  as  a  wrong  way  of  counting  notes,  or  a  lack  of  system 
in  handling  the  individual  transactions,  may  result  in  constant  errors. 
It  is  a  safe  rule  to  count  the  money  twice  before  paying  it  out. 
When  the  day's  work  does  not  settle,  the  settlement  should  never  be 
forced,  but  every  effort  should  be  made  to  locate  the  difference,  no 


BANKING  DEPARTMENT  53 

matter  how  small,  as  it  may  be  the  result  of  two  larger  errors  which 
almost  balance  each  other. 

Different  institutions  have  varying  practices  as  to  the  disposition 
of  "shortages"  and  "overs."  The  custom  of  permitting  the  teller 
to  make  up  a  shortage  is  a  vicious  one  —  for  it  at  once  takes  him  into 
partnership,  as  it  were,  and  naturally  results  in  his  keeping  any 
"overs"  to  help  reimburse  himself  for  the  hard-earned  money  he 
has  had  to  pay  out.  The  knowledge  that  he  may  be  personally  liable 
for  his  errors,  also  has  a  tendency  to  make  him  nervous  and  to 
result  in  further  mistakes.  In  some  institutions  a  definite  sum  is  set 
aside  each  year  to  cover  shortages.  Probably  the  most  satisfactory 
method  is  not  to  appropriate  any  definite  sum,  but  to  have  every 
error,  whether  shortage  or  over,  entered  in  a  general  ledger  account, 
"Errors  in  Cash."  Even  when  the  company  assumes  liability  for  all 
errors,  the  officers  should  impress  on  the  tellers  the  necessity  of  accu- 
racy and  the  bearing  which  it  may  have  on  the  question  of  promotion 
or  even  upon  the  retention  of  their  positions.  The  knowledge  that 
his  errors  are  recorded  and  reported,  is  in  itself  a  sufficient  penalty 
for  a  conscientious  and  careful  teller,  who  would  often  much  rather 
make  up  a  difference  than  have  it  become  known.  In  all  cases  the 
charge  or  credit  should  be  initialled  by  the  proper  officer  and  a  note 
of  the  difference  should  appear  in  the  settlement  book  —  even  if  it 
amounts  to  no  more  than  a  cent  —  for  at  a  later  date  it  may  serve  to 
explain  some  mysterious  tangle.  It  is  often  wise  to  carry  a  difference 
for  at  least  two  days  before  charging  it  up.  If  not  found  within 
this  time,  the  mistake  is  not  likely  to  be  discovered. 

The  work  of  the  paying  teller's  department  comprises  the  pay- 
ment of  checks  with  cash,  the  settlement  for  checks  paid  either 
through  the  clearing  house  or  to  bank  runners,  according  to  the  local 
custom,  and,  where  the  receiving  teller  settles  through  the  paying 
teller,  the  deposit  of  funds  in  bank.  When  there  is  more  than  one 
paying  teller,  each  should  have  his  own  cash  and  make  his  own  set- 
tlement, the  chief  teller  making  the  general  settlement  for  the 
entire  department.  The  settlements  "between  tellers"  should  be 
detailed,  so  as  to  facilitate  the  location  of  errors.  In  some  com- 
panies each  teller  pays  checks  drawn  on  accounts  in  certain 
ledgers.  More  often,  the  tellers  pay  items  indiscriminately.  The 
former  system  makes  each  teller  responsible  for  a  certain  number  of 


54  THE  MODERN  TRUST  COMPANY 

accounts  with  which  he  can  be  more  familiar  than  where  he  has  to 
remember  a  greater  number  of  signatures.  The  latter  method  saves 
time,  however,  and  hence  is  more  satisfactory  from  the  depositors* 
standpoint,  and  certainly  makes  it  easier  to  deal  with  large  numbers 
of  customers.  Bank  exchanges  are  usually  received  at  a  special 
window  by  an  assistant  teller,  in  order  to  facilitate  the  handling  of 
the  quantities  of  checks  which  are  presented  in  this  way. 

In  paying  checks  over  the  counter,  great  care  must  be  exercised 
in  examining  both  the  indorsements,  and  the  signatures,  and  the  teller 
must  be  satisfied  as  to  the  person  presenting  the  check.  It  is  a 
common  practice,  for  the  protection  of  the  depositor  as  well  as  of  the 
bank,  to  refuse  payment  of  large  checks  drawn  to  bearer  when  pre- 
sented by  strangers.  When  bearer  checks  for  any  large  amount  are 
cashed,  the  payee  should  be  required  to  indorse  the  check,  and  it 
may  sometimes  be  wise  also  to  insist  on  identification.1 

The  indorsements  of  checks  paid  through  the  clearing  house  or 
directly  to  another  bank,  are  guaranteed  by  the  institution  receiving 
such  payment,  a  stamped  indorsement  generally  being  used,  with 
some  such  wording  as,  — 

"  Pay  any  bank,  trust  company,  or  banker ;  all  prior  indorsements  guaranteed." 

All  qualified  indorsements  must  be  absolutely  guaranteed  by  the 
presenting  bank. 

After  payment  of  the  checks,  they  are  placed  on  a  file  which  makes 
a  small  cut  and  are  then  listed  on  an  adding  machine  or  in  a  scratcher, 
and  are  passed  to  the  bookkeeper  to  be  sorted  and  posted.  They 
are  not  cut  "Paid"  before  the  day's  work  is  completed,  as  overdrafts 
may  not  be  detected  until  the  bookkeeper  posts  the  checks. 

Bank  runners  presenting  checks  are  usually  paid  by  checks  on 
the  institutions  in  which  deposit  accounts  of  the  company  are  kept. 
The  banks  in  which  trust  companies  deposit,  generally  allow  the  latter 
interest  and  collect  checks  and  all  other  items  for  them.  The  trust 
companies,  being  among  the  largest  and  most  satisfactory  customers 
of  the  banks,  receive  liberal  treatment,  notwithstanding  the  fact  that 
the  banks  often  consider  them  dangerous  rivals.  Trust  companies' 
bank  accounts  are  usually  settled  weekly  and  interest  is  added  each 
month. 

1  See  Banking  Law  Journal,  Vol.  XX,  p.  771,  "  Indorsement  of  checks  paid  over 

the  counter." 


PAYING  TELLER'S  DAILY  SETTLEMENT 

RECEIPTS 

Balance  at  Opening 

From  Receiving  Teller 

(I  From  Savings  Department 

DISBURSEMENTS 

Individual  Depositors,  - 

1           A  -  F 

G-N 

0  -  Z 

1  Certificates  of  Deposit 

Certified  Checks 

Demand  Loans 

1  Time  Loans 

1  Commercial  Paper 

Stocks 

Bonds 

|  Mortgages 

!  Accrued  Interest  Receivable 

Expenses  Payable 

|  Accrued  Interest  Payable 

Balance 

Notes    -  1st  Teller 

2nd      " 

Specie    -  1st  Teller 

2nd     •" 

Checks  -  1st  Teller 

2nd      " 

I                                                          National  Bank 

1                                                          National  Bank 

1                                                          National  Bank 

&  Co.  Bankers 

Balance  at  Closing 

,     ,, 

55 


THE  MODERN   TRUST  COMPANY 


The  paying  teller's  daily  settlement  book  shows  the  gross  amount 
on  hand  at  opening,  to  which  is  added  the  total  of  the  day's  receipts 
from  the  receiving  teller.  From  this  sum  the  day's  payments  are 
subtracted,  the  resulting  balance  equalling  the  amount  of  cash  on 
hand  and  in  bank,  which  is  shown  in  detail. 

The  payments  are  subdivided  according  to  the  general  ledger 
accounts  charged,  and  in  the  case  of  individual  depositors  are  further 
itemized  to  show  the  amount  charged  against  each  depositors'  ledger. 
The  titles  of  the  more  active  general  ledger  accounts  are  printed,  and 
space  is  left  in  which  to  write  those  which  occur  less  frequently. 

The  balance  on  hand  at  the  close  of  business  is  separated  into 
notes  and  specie,  showing,  when  there  is  more  than  one  teller,  the 
amount  in  the  possession  of  each,  and  also  the  balance  in  every  bank 
in  which  the  company  carries  a  deposit. 

Depositors  frequently  wish  to  have  their  checks  certified  or  to  get 
in  place  of  them  bank  drafts  on  a  local  or  distant  institution.  In  the 
latter  case,  if  the  depositor's  check  is  good,  the  trust  company  issues 
its  own  check  in  exchange  for  the  depositor's,  and  in  the  former, 
the  following  form  is  stamped  across  the  face  of  the  check  and  prop- 
erly filled  out :  — 


Good  for  $ 

when  properly  endorsed. 


Treasurer. 


The  amount  of  the  check  is  also  indicated  by  figures  with  a  safety 
device  or  punch.  At  the  same  time,  a  charge  is  made  out  on  the  fol- 
lowing form,  which  takes  the  place  of  the  certified  check  until  its 
final  payment :  — 


Date. 


The  Paying  Teller  will  please  charge $_ 

being 


Treasurer. 


BANKING  DEPARTMENT  57 

The  amount  of  the  certified  check  is  at  once  charged  against  the 
depositor's  account  and  is  placed  to  the  credit  of  a  general  ledger 
account  called  "  Certified  Checks."  When  the  check  is  finally 
paid,  it  is  placed  with  the  depositor's  other  cancelled  checks,  the 
treasurer's  charge  slip  is  withdrawn,  and  the  general  ledger  account 
is  charged  with  the  amount  of  the  check. 

The  forms  of  charge  slip  used  against  general  ledger  and  indi- 
vidual depositors'  accounts  are  often  printed  in  different  colors  or  on 
different  sorts  of  paper,  in  order  to  distinguish  them  easily. 

When  a  depositor's  check  is  lost,  the  drawer  should  promptly 
report  this  fact  and  sign  a  "stop  payment"  order,  giving  the  date, 
amount,  and  number  of  the  check,  and  the  names  of  both  the  drawer 
and  payee.  The  notice  is  entered  in  a  record  of  stop  payment 
orders,  and  is  also  placed  on  a  list  which  the  teller  keeps  before 
him.  When  the  missing  check  is  found,  the  fact  should  be  reported 
promptly  so  that  the  item  can  be  crossed  off  the  list,  which  under  the 
best  of  conditions  is  too  long  for  the  comfort  of  the  teller. 

CLEARING  TRUST  COMPANY  CHECKS 

The  clearing  of  checks  brings  up  at  once  the  moot  subject  of 
the  relation  between  trust  companies  and  banks. 

In  some  places  their  attitude  is  distinctly  hostile,  the  banks  com- 
plaining that  business  is  taken  from  them  by  their  unrestricted  com- 
petitors, while  the  trust  companies  feel  that  although  they  are  among 
the  banks'  best  customers,  they  are  often  discriminated  against,  and 
are  made  to  pay  too  dearly  for  their  privileges. 

In  other  localities,  notably  in  the  West,  the  banks  and  trust  com- 
panies have  been  quicker  to  realize  that  there  is  plenty  of  room  for 
both  classes  of  institution,  and  have  worked  in  harmony  to  their 
mutual  advantage. 

Particularly  in  the  matter  of  clearing,  any  device  for  expediting 
and  simplifying  the  payment  of  checks  is  of  benefit  to  the  banks 
and  trust  companies,  and  to  the  customers  of  both. 

In  New  York  and  Chicago,  trust  companies  may  be  members  of 
the  local  clearing  houses  where  they  are  subject  to  the  same  regula- 
tions, and  have  the  same  privileges  as  the  other  bank  members. 
Both  these  Clearing  Houses  also  provide  for  the  clearance  of  non- 
members'  checks. 


58  THE   MODERN   TRUST   COMPANY 

The  terms  under  which  the  New  York  Clearing  House  permits 
clearing  for  non-members,  adopted  February  n,  1903,  are  as 
follows :  — 


"  i.  No  member  of  the  association  shall  make  exchanges  through  the  clear- 
ing house  for  any  bank  or  other  institution  whose  exchanges  have  not  heretofore 
been  so  made  through  a  member,  unless  the  same  shall  have  been  actually  doing 
business  for  at  least  one  year,  nor  until  the  making  of  such  exchanges  by  a  mem- 
ber shall  have  been  approved  by  the  clearing-house  committee  after  an  examina- 
tion of  such  bank  or  institution  made  by  the  clearing-house  committee,  or  by 
some  other  committee  of  the  association  duly  appointed  for  that  purpose. 

"  The  consent  of  the  clearing-house  committee  shall  also  be  necessary  to  the 
transfer  of  the  making  of  the  exchanges  for  a  non-member  by  one  member  to 
another  member. 

u  2.  On  and  after  January  i,  1904,  every  non-member  bank  or  institution  now 
or  hereafter  sending  its  exchanges  through  a  member  of  the  association  shall  pay 
to  the  association  the  amount  of  $1000  annually  in  advance. 

"3.  Every  non-member  bank  or  institution  now  or  hereafter  sending  its 
exchanges  through  a  member  of  the  association  shall  submit,  whenever  required 
by  the  clearing-house  committee,  to  the  same  examinations  as  are  now  required 
of  members  of  the  association. 

"4.  Every  non-member  bank  or  institution  now  or  hereafter  sending  its 
exchanges  through  a  member  of  the  association  shall  furnish  to  the  Manager  of 
the  clearing-house,  at  the  close  of  business  on  each  Friday,  a  weekly  statement  of 
its  condition  in  such  form  as  shall  be  prescribed  by  the  clearing-house  committee 
from  time  to  time  as  to  any  class  of  non-members. 

"5.  Every  non-member  institution  (not  a  bank  required  by  law  to  maintain  a 
specified  reserve)  now  or  hereafter  sending  its  exchanges  through  a  member  of  the 
association,  shall,  on  and  after  June  i,  1903,  keep  in  its  vaults  a  cash  reserve 
equal  to  five  per  cent  of  its  deposits  ;  and  on  and  after  February  i,  1904,  such  cash 
reserve  shall  be  at  least  seven  and  one-half -per  cent  of  its  deposits,  and  on  and 
after  June  i,  1904,  such  cash  reserve  shall  be  such  percentage  as  shall  from  time 
to  time  be  fixed  by  the  clearing-house  committee,  but  not  less  than  ten  nor  more 
than  fifteen  per  cent  of  its  deposits.  The  reserve  hereby  required  shall  be  an 
average  reserve  as  against  the  average  deposits  as  shown  upon  its  weekly  state- 
ments. 

"  If  any  non-member  bank  or  institution  or  party  now  or  hereafter  sending  its 
exchanges  through  a  member  of  the  association  shall  fail  to  comply  with  any  of 
the  foregoing  requirements  applicable  to  such  non-member,  or  upon  examination 
shall  be  found  in  an  unsatisfactory  condition,  the  clearing-house  committee  may 
suspend  any  privilege  previously  given  to  members  of  the  association  to  make  ex- 
changes or  redemptions  for  such  non-member;  such  suspension  to  take  effect 
upon  the  completion  of  the  exchanges  of  the  morning  following  the  giving  of 
notice  of  such  suspension  by  the  Manager  to  the  members  of  the  association." 


BANKING  DEPARTMENT  59 

In  Chicago,  the  number  of  non-members  whose  checks  pass 
through  the  clearing  house  far  exceeds  the  number  of  members. 
Section  22  of  the  Articles  of  Association  of  the  Chicago  Clearing 
House  is  as  follows :  — 


"Any  member  of  this  Association  may  clear  for  any  bank  or  bankers  in  the 
city  of  Chicago  or  vicinity  —  not  members  of  this  Association  —  after  obtaining 
the  consent  of  the  Clearing  House  Committee,  and  being  obligated  to  pay  this 
Association  annually  the  sum  of  $250  for  each  of  such  banks  or  banking  firms 
having  a  capital  exceeding  $50,000,  and  the  sum  of  $150  for  each  of  those  having 
a  capital  of  $25,000  to  $50,000.  Such  bankers  or  banking  firms  shall  consent  under 
proper  authority  to  the  same  examinations,  and  render  the  same  statements  of 
their  condition  as  are  required  of  the  members  of  this  Association  .  .  .  and 
shall  be  subject  to  all  such  rules  and  regulations  in  matters  of  common  interest 
arising  from,  or  affecting  relations  with  banks  in  other  localities,  and  the  fostering 
of  sound  and  conservative  methods  of  banking,  as  have  been  or  may  from  time 
to  time  be  adopted  by  this  Association  .  .  .  and  shall  sign  an  agreement  so  to 
do  in  such  form  as  the  Clearing  House  Committee  may  require.  The  Clearing 
House  Committee  shall  satisfy  itself  that  all  non-members  for  whom  members 
clear  are  bona  fide  engaged  in  the  business  of  banking,  and  have  a  capital 
employed  in  such  business  of  not  less  than  $25,000.  Individuals,  firms  or  cor- 
porations engaged  in  other  lines  of  business  receiving  deposits  from  their 
employees  or  others  which  they  use  in  their  regular  business  shall  not  be  con- 
strued as  coming  within  the  meaning  of  banks,  bankers,  or  banking  firms.  This 
amendment  to  go  into  effect  on  January  i,  1902." 


Where  trust  companies  cannot  be  members  of  the  clearing  house, 
they  are  usually  permitted,  as  in  Philadelphia,  to  clear  through  an 
agent  bank  under  definite  rules  laid  down  by  the  clearing  house 
association. 

The  Philadelphia  Clearing  House  Association  requires  from  non- 
members  annual  payments  graduated  according  to  amount  of  capital 
and  surplus,  weekly  statements  of  condition,  the  maintenance  of  a  re- 
serve of  five  per  cent  in  cash  and  ten  per  cent  in  approved  deposito- 
ries, and  the  deposit  of  collateral  with  the  clearing  house  committee. 

In  Pittsburg,  the  privileges  of  the  Clearing  House  are  extended 
to  the  City  Post  Offices  of  Pittsburg  and  Allegheny,  to  the  express 
companies,  and  to  private  bankers.  The  payment  of  quarterly  dues 
is  required,  based  on  the  capitalization  of  the  non-member. 

In  Boston,  the  members  of  the  Clearing  House  are  permitted  to 
clear  for  non-members,  the  consent  of  the  clearing  house  committee 


60  THE  MODERN   TRUST  COMPANY 

having  first  been  obtained.  The  non-members  are  required  to  pay 
annually  for  the  support  of  the  Clearing  House  such  sums  as  are  de- 
manded by  the  clearing  house  committee.  None  of  the  trust  com- 
panies are  members  of  the  Association,  but  all  clear  their  checks 
through  some  agent  bank. 

Where  no  clearing  house  privileges  are  accorded  the  trust  com- 
panies, or  in  case  the  trust  companies  have  not  availed  themselves 
of  clearing  house  privileges,  the  exchanges  are  collected  by  the 
messengers  of  the  banks,  and  the  trust  companies  deposit  in  the 
banks  all  checks,  whether  payable  at  local  trust  companies  and 
banks  or  elsewhere.  This  means  a  delay  in  the  final  payment  of 
checks  drawn  on  non-members,  with  the  added  risk  of  non-payment 
which  is  thereby  inevitably  incurred.  It  also  involves  much  clerical 
work  for  all  concerned,  without  any  corresponding  advantages.  The 
future  will  undoubtedly  see  the  general  introduction  of  a  uniform 
system  of  clearing  on  equal  terms  for  all  companies  doing  a  legiti- 
mate banking  business.  To  accomplish  this  the  banks  must  recog- 
nize the  claims  of  the  newer  organizations,  and  the  trust  companies 
must  agree  to  proper  restriction  —  now  often  lacking  —  and  bear  a 
just  proportion  of  the  expenses  of  the  clearing  house. 

Whether  the  trust  companies  clear  as  members  of  the  local  clear- 
ing house  association  or  as  non-members,  matters  little  so  long  as  the 
main  object  is  secured.  The  value  of  the  clearing  house  and  the 
possibilities  of  the  expansion  of  the  system  are  as  yet  but  little  under- 
stood. The  time  will  come,  however,  when  more  general  clearing 
facilities  will  be  recognized  as  essential  to  the  prosperity  not  only  of 
the  banks  and  trust  companies,  but  of  the  whole  business  community. 
The  spirit  of  antagonism  that  has  been  prevalent  must  give  way  to 
a  due  appreciation  of  the  rights  and  responsibilities  of  both  classes 
of  institutions. 

Where  a  trust  company  clears  through  an  agent  bank,  the  proced- 
ure is  usually  as  follows :  if  required  by  the  rules  of  the  local  clear- 
ing house,  the  trust  company  first  agrees  to  abide  by  the  conditions 
therein  provided,  as  to  reserves,  statements,  etc.;  the  bank  is  then 
given  authority  to  clear  for  the  trust  company  and  sends  notice 
to  all  the  members  of  the  clearing  house  association  that  items 
on  the  trust  company  will  be  received  by  it  through  the  regular  ex- 
changes. All  such  items  of  the  trust  company  are  put  up  in  separate 


BANKING  DEPARTMENT  6l 

sealed  envelopes,  the  total  of  which  envelopes  is  listed  as  one  item  on 
the  regular  exchange  envelope  of  the  agent  bank.  The  agent  bank 
has  the  same  right  to  return  the  trust  company's  items  as  it  has  to 
return  its  own  items.  When  the  exchanges  are  taken  from  the  clear- 
ing house  to  the  agent  bank,  the  trust  company's  envelopes  are  im- 
mediately sorted  and  their  totals  listed.  They  are  then  sent  to  the 
trust  company,  which  gives  a  receipt  for  the  total  amount  shown.  All 
the  envelopes  are  then  opened,  amounts  proved,  items  examined,  etc., 
and  checks  posted  by  the  bookkeepers.  Such  items  as  are  in  any 
way  irregular,  the  trust  company  returns  to  the  agent  bank  in  time 
for  return  to  the  sending  bank  through  the  next  exchange.  At  the 
same  time,  the  trust  company  sends  a  check  to  the  agent  bank  cov- 
ering the  total  amount  of  the  exchange  less  the  items  returned,  and 
takes  up  the  receipt  given  earlier  in  the  day,  or  else  takes  one  from 
the  agent  bank  for  the  purpose  of  keeping  a  record  of  the  transaction. 
When  there  is  a  second  clearing  each  day,  the  same  procedure  is  fol- 
lowed after  the  later  exchange,  except  that  the  trust  company  pays 
the  agent  bank  in  full  on  delivery  of  the  exchange  and  is  then  respon- 
sible for  the  return  of  all  irregular  items  to  the  sending  banks  by 
runner  before  the  close  of  business  of  the  same  day. 

Deposits  with  the  various  banks  in  which  the  trust  company  car- 
ries accounts  are  made  in  the  ordinary  way.  The  trust  company's 
accounts  become  much  less  active  than  before,  because  a  single  check 
covers  each  clearing.  Clearing  through  the  regular  exchanges,  more- 
over, relieves  the  banks  of  collecting  by  messenger  from  the  various 
trust  companies. 

In  the  trust  company,  the  receipt  of  the  morning's  exchange  makes 
it  possible  for  the  bookkeepers  to  post  the  previous  day's  items  early 
in  the  day.  The  work  of  the  paying  teller's  department  is  also  less 
than  where  the  bank  runners  are  straggling  in  during  the  day  and 
each  has  to  be  paid  separately. 

CARE   OF  DEPOSITS 

Simplicity  and  accuracy  are  the  prime  requisites  of  any  system 
for  the  care  of  deposits.  Where  each  operation  has  to  be  repeated 
so  often,  a  cumbersome  method,  though  it  add  only  a  few  seconds 
each  time,  will  in  the  end  mean  hours  of  unnecessary  labor. 


62  THE   MODERN  TRUST  COMPANY 

The  principle  is  well  illustrated  by  the  Eleventh  Census  which 
was  taken  on  the  family-schedule  basis,  thus  giving  a  single  individual, 
if  unmarried,  a  separate  page  instead  of  putting  on  each  sheet  as  many 
names  as  it  would  carry.  The  result  is  that  the  Eleventh  Census  is 
still  unbound  and  would  require  some  thirty  thousand  volumes,  while 
the  Twelfth  Census  is  contained  in  six  thousand  volumes. 

New  accounts  are  opened  by  the  treasurer,  or  a  representative  of 
that  officer  detailed  for  the  purpose,  who  often  presides  over  a  special 
window  marked  "New  Accounts."  When  opening  an  account  it  is 
customary  to  require  a  satisfactory  introduction  of  the  depositor  and 
to  secure  such  other  facts  as  may  be  needed.  Too  great  care  cannot 
be  exercised  in  deciding  whether  an  account  is  to  be  accepted  or 
declined.  Even  with  the  assistance  of  definite  rules  governing  the 
required  balance,  rate  of  interest,  etc.,  much  has  to  be  left  to  the  offi- 
cer's tact  and  discretion,  and  each  case  must  be  considered  on  its  own 
merits.  A  little  more  power  of  observation  would  have  spared  em- 
barrassment to  the  officer  who  asked  a  handsome  depositor,  "What 
is  your  Christian  name,  Madam?"  and  received  the  prompt  and  dig- 
nified reply,  "My  given  name  is  Leah."  A  glance  at  the  prospective 
depositor's  left  hand  will  usually  give  the  clew  as  to  whether  the  next 
question  should  be  "Miss?"  or  "Mrs.?"  The  reply,  however,  may 
bring  surprises,  as  in  the  case  of  a  stout,  middle-aged,  and  much-be- 
jewelled lady  who  gushingly  answered,  "A  bride  of  yesterday." 

One  often  hears  the  statement  that  a  depositor  has  a  right  to  open 
an  account  in  any  way  he  chooses,  but  it  should  be  borne  in  mind 
that  the  proper  authority  must  be  shown  when  the  funds  are,  for 
example,  those  of  an  executor  or  trustee,  or  belong  to  an  incorporated 
organization.  Some  trust  companies  even  decline  to  open  an  account 
in  the  name  of  "  John  Doe,  Trustee,"  and  require  the  trust  to  be  desig- 
nated. The  ground  for  such  action  is  that  complications  and  possi- 
ble liability  may  be  avoided  by  having  the  ownership  of  the  fund  on 
deposit  clearly  designated.  A  safe  rule  to  follow  in  opening  accounts 
for  decedents'  estates  or  trusts  is  that  the  title  should  be  that  of  the 
estate,  corporation,  or  trust,  but  never  the  name  of  the  executor, 
officer,  or  trustee,  as  these  individuals  may  change  from  time  to  time 
during  the  continuance  of  the  account. 

In  opening  an  account,  a  specimen  of  the  signature  or  signatures 
is  taken  on  a  card,  on  the  back  of  which  the  depositor's  address  and 


Date 


DKPOSIT  ACCOUNTS. 


Name 


Signature  Card 


Address 


Ledger 


Taken  by 


In  Pay- 

THE 


Opened 


Ledger 


Interest 
Sheet 


Examined 
by  Con- 
troUer 


BANKING  DEPARTMENT  63 

any  other  information  are  recorded.  A  card  about  3"  x  5"  is  a  satis- 
factory size.  At  the  same  time,  it  is  well  to  copy  the  title  of  the 
account  in  an  accession  book  to  be  passed  to  the  various  clerks  affected. 
Each  clerk  should  initial  the  record  to  show  that  he  has  made  the 
appropriate  entries. 

A  similar  book  should  be  used  when  an  account  is  closed,  in  order 
to  be  certain  that  this  fact  is  reported  to  all  concerned.  The  signa- 
ture index  is  kept  by  the  paying  teller.  A  copy  of  this  index,  giving 
the  titles  of  the  open  accounts  and  the  addresses  of  the  depositors, 
should  also  be  kept  by  the  receiving  teller  or  bookkeepers. 

When  an  account  is  closed,  the  signature  card  is  stamped  " Closed" 
and  placed  in  a  special  index  for  closed  accounts.  When  signatures 
are  changed  or  officers  are  superseded,  the  old  signature  cards  are 
stamped  " New  Card "  and  filed  with  the  closed  accounts.  The  tellers' 
index  should  contain  none  but  open  accounts,  as  the  tellers  are  con- 
cerned with  current  business  only.  A  separate  alphabetical  index  of 
closed  accounts  is  of  great  value,  as  information  is  constantly  being 
asked  for  in  regard  to  the  business  of  past  years.  The  dates  when 
the  account  was  opened  and  closed  being  given  on  the  card,  the 
account  is  easily  located  in  the  proper  ledger. 

When  an  account  is  opened,  a  pass  book  is  inscribed  with  the  title 
of  the  account,  a  deposit  slip  is  made  out,  and  the  depositor  is  given 
any  needed  information  as  to  deposits  and  withdrawals  and  the  rules 
of  the  company.  This  done  he  is  ready  to  proceed  to  the  receiving 
teller's  window,  where  the  deposit  is  received  and  examined  and  en- 
tered in  the  pass  book.  The  receiving  teller  passes  the  deposit  slip 
to  the  individual  depositors'  bookkeeper,  in  order  that  proper  credit 
may  be  given  the  depositor. 

The  bookkeepers,  handling  hundreds  of  items  each  day,  must 
necessarily  be  quick  and  accurate.  Neatness,  legible  handwriting, 
and  facility  in  mental  arithmetic  are  also  important  qualifications. 
It  should  be  an  absolute  rule  that  no  bookkeeper  be  permitted  to 
have  any  account  in  his  ledger  in  which  he  has  an  interest,  either 
direct  or  indirect. 

The  system  of  records  must  be  simple  and  accurate,  so  arranged 
that  the  balance  of  each  account  is  readily  ascertainable,  and  that 
trial  balances  can  easily  be  taken  off. 

In  former  years,  an  individual  depositors'  ledger  was  usually  ruled 


64  THE  MODERN  TRUST  COMPANY 

in  the  ordinary  ledger  form,  the  checks  entered  in  the  left-hand  or 
debit  column,  and  the  deposits  or  credits  in  the  right-hand  column. 
The  account  was  balanced  by  adding  to  the  checks  the  difference  be- 
tween the  two  sides,  or  the  amount  to  the  depositor's  credit.  The 
account  was  then  ruled  up,  showing  balancing  totals  on  each  side.  In 
case  of  an  overdrawn  or  debit  balance,  the  amount  of  the  shortage 
would  be  added  to  the  deposit  column.  The  pass  book  was  a  minia- 
ture copy  of  the  ledger,  the  deposits  being  entered  on  the  left-hand 
page  and  the  checks  listed  in  detail  on  the  right-hand  page.  Owing 
to  the  large  increase  in  accounts  and  the  more  general  use  of  checks, 
this  method  has  been  superseded,  and  a  gradual  evolution  in  the  direc- 
tion of  accuracy  and  speed  has  taken  place. 

The  so-called  "Boston  System,"  by  which  the  balance  of  each 
account  is  carried  forward  each  day  and  a  daily  settlement  of  the  ledger 
is  made,  is  in  very  general  use  in  both  national  and  state  banks.  Trust 
companies  carry  less  active  accounts  —  except  when  they  do  gen- 
eral commercial  banking  —  and  consequently  do  not  need  to  keep 
their  individual  depositors'  ledgers  in  daily  balance  with  the  general 
ledger.  Adaptations  or  modifications  of  the  Boston  System,  provid- 
ing for  weekly,  bi-weekly,  or  monthly  trial  balances,  are  more  nearly 
suited  to  their  needs.  So-called  "  Duplicate  Systems,"  by  which  the 
account  is  kept  by  two  entirely  distinct  sets  of  bookkeepers,  are  also 
finding  favor  in  commercial  banks.  When  such  a  system  is  used, 
it  is  customary  to  enter  deposits  in  a  pass  book,  as  a  memorandum, 
but  not  to  settle  the  book.  Instead,  one  copy  of  the  account  is  sent 
the  depositor  at  fixed  intervals,  with  the  cancelled  checks. 

The  methods  adapted  to  commercial  banks  are  fully  described  in 
all  books  on  general  banking.  The  present  work  is  rather  concerned 
with  an  adequate  system  for  the  care  of  less  active  trust  company 
deposits.  Without  attempting  to  consider  the  many  systems  in  use, 
a  single  one  will  be  described  in  detail. 

Ledgers  are  now  found  in  bound  books,  on  loose  leaves  in  some 
form  of  binder,  or  on  cards.  Bankers  of  conservative  tendencies 
still  favor  the  bound  book,  and  some  wrell-known  bank  examiners 
even  hold  that  the  loose-leaf  ledger  is  dangerous  in  the  extreme. 
Notwithstanding  such  opinions,  this  type  of  ledger  is  coming  into 
more  general  use  each  year,  and  there  are  strong  arguments  in 
its  favor.  Many  companies  compromise  by  having  all  books  of 


DEPOSIT  ACCOUNTS 


Date 


Name 


CLOSED 

1 
Why  Closed 

\ccount  Closed 

fass 
Book 
Settled 

Card    £ 
Removed 
from 
Rec. 
Teller's 
Index 

ignature 
Removed 
from 
Paying 
Teller's 
Tndex 

Signature 
filed     ; 
in 
Closed 
Index 

]xaminec 
by 
^ontrolle 

Ledger 

[nterest 
Sheet 

. 

-  — 

0 



BANKING  DEPARTMENT  65 

original  entry  bound,  and  all  supplementary  books  of  the  loose-leaf 
type. 

The  system  here  described  is  best  suited  for  a  bound  book,  but 
can  be  used  in  the  loose-leaf  form. 

The  bookkeeper's  equipment  consists  of  the  ledger,  the  scratcher, 
the  interest  slip,  the  sorting  tray,  and  blotters.  A  bookkeeper  and 
assistant  can  care  for  from  one  thousand  to  two  thousand  accounts, 
the  number  depending  on  the  activity  both  of  the  bookkeepers  and 
the  accounts.  The  work  is  facilitated  by  dividing  the  accounts  be- 
tween two  smaller  ledgers  rather  than  using  a  single  large  volume. 

A  convenient  size  for  the  ledger  page  is  i^'xiy".  At  the 
outer  edge  of  the  left-hand  page  a  space  is  provided  for  the  names  of 
depositors ;  next  is  a  column  for  the  balance  of  each  account  at  date 
of  opening,  followed  by  a  small  space  in  which  to  note  the  date 
of  each  entry.  This,  in  turn,  is  followed  by  three  money  columns, 
the  first  for  checks,  the  third  for  deposits,  and  the  second  or  centre 
column  for  the  daily  balances.  These  columns  appropriately  printed 
carry  the  work  of  the  first  month.  By  a  repetition  of  these  columns 
and  the  use  of  two  short  leaves,  the  ledger  is  constructed  to  last  for 
a  year.  To  facilitate  the  finding  of  accounts,  a  space  is  provided  on 
the  extreme  right  in  which  the  names  may  again  be  entered  and,  as 
a  further  aid,  the  index  letters  of  the  accounts  on  each  page  are 
placed  in  the  small  rectangle  printed  at  the  upper  corners.  The 
faint  lines  are  numbered  at  each  margin,  and  every  fifth  line  is  a  trifle 
heavier  than  the  others,  thus  aiding  the  eye  in  following  an  account 
across  the  page. 

The  accounts  should  be  arranged  alphabetically,  and  to  each 
should  be  allotted  a  space  sufficient  to  hold  the  entries  likely  to  occur 
in  any  one  month.  A  number  of  accounts  can  thus  be  entered  on 
each  page,  the  exact  number  varying  with  their  activity.  Additional 
spaces  should  be  left  between  each  letter  change  (Aa,  Ab,  Ac,  etc.), 
so  that  new  accounts  which  are  received  from  time  to  time  may  be 
entered  in  approximately  alphabetical  order. 

In  opening  the  ledger,  which  should  be  done  at  a  slack  time  during 
the  latter  part  of  the  month,  the  balance  of  each  account  is  entered 
in  the  first  balance  column.  This  column  is  then  added,  and  the 
totals  of  all  the  pages  in  the  ledger  should  equal  the  balance  shown 
in  the  general  ledger.  Postings  are  made  as  in  an  ordinary  ledger, 


66 


BANKING  DEPARTMENT  67 

and  the  new  balance  made  by  each  entry  is  placed  in  the  balance 
column,  found  between  the  "checks"  and  " deposits "  columns  under 
each  month. 

It  is  intended  that  trial  balances  shall  thereafter  be  taken  monthly, 
at  such  time  during  the  month  as  is  most  convenient.  When  this 
is  to  be  done,  the  last  balances  are  thrown  into  the  next  dated 
" balance"  column,  and  the  footings  made,  summarized,  and  com- 
pared with  the  general  ledger,  as  at  time  of  opening. 

Some  of  the  advantages  of  this  ledger  are :  — 

1.  The  ease  with  which  it  can  be  kept  in  balance.    The  monthly 
trial  balance  can  be  taken  off  more  quickly  than  from  any  other  form 
of  ledger,  as  the  ledger  itself  forms  a  trial  balance. 

2.  Convenience  in  posting.     Each  page  contains  a  number  of 
accounts,  thus  requiring  less  turning  of  leaves  to  find  accounts. 

3.  Errors  can  be  readily  located.     Each   page   must   balance, 
the  total  of  opening  balances  and  deposits  being  equal  to  the  total 
of  checks  and  closing  balances. 

4.  Facility  in  making  an  almost  absolutely  certain  audit.     By 
simply  ascertaining  the  total  of  the  "checks"  and  "deposits"  col- 
umns in  each  depositors'  ledger  for  any  given  month,  an  auditor  can 
prove  the  results  by  comparing  them  with  the  total  postings  in  the 
general  ledger  during  the  corresponding  period,  and  with  the  totals 
shown  by  the  tellers'  daily  settlements.    In  this  way  a  three-cornered 
test  of  the  depositors'  accounts  can  be  secured  that  will  show  errors, 
omissions,  or  irregular  transfers  of  items  from  one  account  to  another. 

It  is  in  conformity  with  the  best  practice  to  make  postings  to 
ledger  accounts  directly  from  the  checks  and  deposit  slips.  Only 
by  using  original  papers  wherever  possible  can  the  highest  degree 
of  accuracy  be  attained. 

At  intervals  during  the  day,  arranged  according  to  the  amount  of 
work,  the  tellers  pass  the  paid  checks  and  deposit  slips  to  the  assist- 
ant bookkeepers.  Each  one  arranges  his  items  alphabetically,  both 
deposit  slips  and  checks  together.  The  head  bookkeepers  then 
place  them  in  their  sorting  trays,  light  wooden  boxes  10"  x  13}" 
with  sides  i"  high  and  a  division  across  the  centre.  The  unposted 
items  are  kept  in  one  division,  face  up,  and  the  posted  items  face 
down  in  the  other.  The  box  also  prevents  the  checks  and  de- 
posit slips  from  being  scattered.  From  the  checks  and  deposit 


68  THE  MODERN   TRUST  COMPANY 

slips  the  bookkeeper  posts  to  the  proper  account,  entering  all  the 
checks  or  slips  of  a  given  depositor  as  a  lump  sum.  He  at  the 
same  time  makes  the  necessary  change  in  the  balance  column  — 
when  there  are  both  credits  and  debits  the  net  change  is  made.  A 
thin  blotter  is  then  inserted  at  the  page  where  the  entry  is  made. 
This  is  done  to  facilitate  finding  the  page,  and  also  to  prevent  any 
item  being  overlooked  when  the  balances  are  verified  at  the  close 
of  business  or  on  the  following  morning. 

The  bookkeeper,  after  posting  the  items,  turns  them  over  to  his 
assistant  who  enters  them  in  his  scratcher.  The  scratcher  is  a  book 
9"  x  17^",  ruled  with  a  description  column  and  three  cash  columns, 
the  first  to  be  used,  when  necessary,  for  listing  separate  checks  and 
the  other  two  for  deposits  and  for  checks  respectively.  Both  pages 
are  ruled  alike.  These  books  should  be  of  about  two  hundred  pages 
each,  and  as  they  are  filled  rapidly,  should  be  cheaply  made.  The 
assistant  enters  the  items  alphabetically  to  correspond  with  their 
order  in  the  ledger,  and  leaves  between  them  enough  space  to  insert 
at  the  proper  point  other  items  which  may  come  in  later  in  the  day. 
In  spacing  the  scratcher,  which  should  be  done  at  the  beginning 
of  the  day,  it  is  well  to  be  a  little  too  liberal  rather  than  the  reverse. 
It  is  only  necessary  to  write  a  depositor's  name  once,  as  all  items 
are  posted  opposite  the  name  and  on  the  lines  immediately  below  it. 

The  bookkeeper,  after  posting  all  the  items  of  the  day,  has  com- 
pleted his  work,  unless  it  is  deemed  wise  to  have  the  interest  slips 
changed  and  the  ledger  balances  verified  the  same  day.  This  can 
usually  be  left  till  the  next  morning,  to  occupy  the  time  before  the 
day's  postings  start.  The  assistant,  however,  is  required  to  add 
the  lists  of  the  day's  checks  and  deposits,  which  he  has  entered  in 
the  scratcher,  and  these  amounts  must  settle  with  the  tellers'  figures. 
The  assistant  bookkeepers  also  give  the  general  ledger  bookkeeper 
a  slip  showing  the  totals  of  the  day's  work,  which  are  verified  by 
comparison  with  the  items  reported  in  the  tellers'  settlements.  After 
the  day's  work  has  settled,  the  paying  teller's  assistant  cuts  the 
checks,  usually  with  a  cancelling  machine  which  punches  the  word 
"Paid"  and  also  the  date. 

The  method  of  computing  interest  on  depositors'  accounts  is 
closely  allied  to  the  ledger,  the  plan  recommended  being  that  of 
allowing  interest  on  the  daily  balances  and  of  using  an  interest  slip 


70  THE  MODERN  TRUST  COMPANY 

arranged  to  show  each  depositor's  daily  balance  for  a  period  of 
six  months. 

The  interest  slip  is  a  sheet  Q£"  x  ioj",  with  six  vertical  cash 
columns,  each  with  thirty-one  lines,  and  headed  with  the  names  of 
six  months,  to  correspond  with  the  semi-annual  periods  at  which 
interest  is  allowed.  Each  deposit  account  has  a  separate  slip.  At 
the  bottom  of  the  slip  is  a  space  for  the  depositor's  name  and  a  space 
in  which  the  interest  allowed  for  each  month  is  entered  and  the  six 
items  are  totalled  at  the  end  of  the  period.  A  new  set  of  slips  is  made 
out  every  six  months. 

The  slips  are  arranged  alphabetically  to  correspond  with  the 
order  of  the  accounts  in  the  ledger.  They  can  be  punched  along  the 
top  margin  and  kept  in  any  binder  which  permits  of  the  sheets  being 
readily  inserted  or  removed. 

The  bookkeepers  begin  the  morning's  work  by  changing  the  pre- 
vious day's  balances  on  the  interest  slips,  while  the  assistants  are 
engaged  in  sorting  and  filing  the  checks  and  deposit  slips. 

Each  bookkeeper  takes  the  scratcher  of  a  ledger  other  than  his  own 
and  from  it  makes  the  necessary  changes  on  the  interest  slips  in  the 
last  balance  of  each  account  affected.  The  new  balance  is  entered 
on  the  line  for  the  day  of  the  month  on  which  the  change  occurs.  A 
blotter  is  inserted  at  each  slip  on  which  the  balance  has  been  changed. 

After  all  the  changes  are  completed,  the  interest  slips  are  returned 
to  the  bookkeeper  to  whose  ledger  they  belong.  The  new  balances 
are  read  off  by  the  assistant  bookkeeper,  and  if  the  postings  in  the 
ledger  and  the  changes  on  the  slips  have  been  correctly  made,  the 
balances  in  both  must  agree.  When  the  items  differ,  they  are  ex- 
amined and  the  necessary  corrections  made.  By  this  system  each 
balance  is  separately  struck  by  two  persons,  and  only  in  case  of  the 
same  error  being  made  by  both  can  a  mistake  pass  unnoticed. 

Interest  on  depositors'  accounts  is  calculated  for  each  month, 
and  the  result  is  entered  in  a  monthly  interest  summary  at  the  bottom 
of  the  slip.  The  method  used  is  to  allow  one  day's  interest  on  the 
total  of  daily  balances  for  the  month.  If  the  balance  in  the  account 
does  not  change  during  the  month,  it  is  multiplied  by  the  number 
of  days  it  remains  unchanged,  and  the  result,  added  to  the  balance 
on  the  first  day,  gives  the  total  sum  on  which  interest  is  to  be  allowed. 
The  amount  of  interest  is  found  by  reference  to  a  table  described 


BANKING  DEPARTMENT  71 

below.  When  the  balance  changes  each  day  in  the  month,  the 
balances  are  added,  and  interest  is  computed  on  the  result.  When 
the  balance  remains  unchanged  for  any  given  time,  it  is  multiplied 
by  the  number  of  days  it  remains  stationary,  and  the  result  is  pen- 
cilled on  the  interest  slip  just  above  the  succeeding  change  in  the 
balance.  This  procedure  is  repeated  as  often  as  required,  and  the 
total  figures  of  both  the  changing  balances  and  the  multiplications 
covering  the  days  when  the  account  was  unchanged,  give  the  total 
to  be  used  as  the  basis  of  the  interest  calculation. 

The  interest  table  gives  one  day's  interest  at  the  rate  allowed,  on 
a  basis  of  three  hundred  and  sixty-five  days  to  the  year.  The  table 
appearing  on  page  72  shows  interest  at  two  per  cent. 

When  varying  higher  rates  are  occasionally  allowed,  the  interest 
is  first  computed  at  two  per  cent.  For  three  per  cent  the  result  is 
increased  one-half ;  for  four  per  cent  it  is  doubled.  It  is  customary 
to  credit  interest  to  the  depositor's  account  at  a  date  somewhat  later 
than  the  period  actually  covered.  This  is  done  in  order  to  give  time 
to  make  the  interest  calculations.  In  large  companies  interest  is 
usually  credited  in  the  various  ledgers  at  different  dates.  The  gen- 
eral practice  is  to  allow  interest  semi-annually. 

Pass  books  should  be  settled  frequently;  if  the  accounts  are 
active,  at  least  once  a  month;  if  inactive,  after  each  interest 
period.  Verification  of  the  accounts  by  the  depositors  is  one  of  the 
best  safeguards  against  error.  When  the  pass  book  is  settled,  the 
balance  shown  should  be  compared  with  the  ledger  balance,  and 
both  should  be  initialled  by  the  controller  or  some  one  outside  the 
bookkeeping  department. 

Perhaps  at  no  point  does  a  trust  company  run  greater  risk  of  loss 
by  fraud  than  through  its  accounts  with  depositors.  As  a  rule  no 
acknowledgment  is  required  from  the  depositor  of  the  receipt  of  can- 
celled checks  or  of  the  correctness  of  the  balance  as  shown  in  the 
settled  pass  book  or  statement  rendered.  When  a  trust  company 
without  question  hands  out  a  depositor's  cancelled  checks  to  any  one 
who  may  call  for  them,  it  can  hardly  claim  that  due  diligence  has 
been  exercised  should  the  depositor  suffer  a  loss.  A  rule  requiring 
the  delivery  of  settled  pass  books  and  cancelled  checks  to  the  deposi- 
tor or  his  duly  authorized  representative  only,  should  be  strictly  en- 
forced. In  addition,  receipts  should  be  taken  in  a  form  that  will 


mDIVIDUAL  DEPOSITORS'  INTEREST  TABLE 


TWO  PER  CENT  INTEREST  ON   DAILY  BALANCES 
One  Day  Interest  at  2%  per  annum  on  basis  of  365  days  to  a  year 

i  to       91  '    .00 

31,000      1.70 

66,000    3.62 

100,000           5.48 

92  to     273      .01 

32,000      1.75 

67,000    3.67 

200,000         10.96 

274  to     456      .02 

33,000    1.8  1 

68,000    3.73 

300,000         16.44 

457  to     638      .03 

34,000    1.86 

69,000    3.78 

400,000         21.92 

639  to     821      .04 

35,000    1.92 

70,000    3.84 

500,000         27.40 

822  to  1,000      .05 

36,000    1.97 

71,000    3.89 

600,000         32.88 

2,000        .11 

37,000    2.03 

72,000    3.95 

700,000         38.36 

3,000      .16 

38,000    2.08 

73,000    4.00 

800,000         43.84 

4,000        .22 

39,000    2.14 

74,000    4.05 

900,000         49.32 

5,000      .27 

40,000    2.19 

75,000    4.11 

1,000,000         54.79 

6,000      .33 

41,000    2.25 

76,000    4.16 

2,000,000       109.59 

7,000      .38 

42,000    2.30 

77,000    4.22 

3,000,000       164.38 

8,000      .44 

43,000    2.36 

78,000    4.27 

4,000,000       219.18 

9,000      .49 

44,000    2.41 

79,000    4.33 

5,000,000       273.97 

10,000      .55 

45,000    2.47 

80,000    4.38 

6,000,000       328.77 

11,000        .60 

46,000    2.52 

81,000    4.44 

7,000,000       383.56 

12,000      .66 

47,000    2.58 

82,000    4.49 

8,000,000       438-36 

13,000    .71 

48,000    2.63 

83,000    4.55 

9,000,000       493.  1  5 

14,000     .77 

49,000    2.68 

84,000    4.60 

10,000,000       547-95 

15,000      .82 

50,000    2.74 

85,000    4.66 

20,000,000      1,095.89 

16,000      .88 

51,000    2.79 

86,000    4.71 

30,000,000    1,643.84 

17,000      .93 

52,000    2.85 

87,000    4.77 

40,000,000    2,191.78 

18,000      .99 

53,000    2.90 

88,000    4.82 

50,000,000  2,739.73 

19,000    1.04 

54,000    2.96 

89,000    4.88 

60,000,000    3,287.67 

20,000    x.xo 

55,000    3.01 

90,000    4.93 

70,000,000   3,835.62 

21,000      1.15 

56,000    3.07 

91,000    4.99 

80,000,000   4,383.56 

22,000      1.21 

57,000    3.12 

92,000    5.04 

90,000,000  4,931.51 

23,OOO      1.26 

58,000    3.18 

93,000    5.10 

100,000,000    5,47945 

24,000      1.32 

59,000    3.23 

94,000    5.15 

25,000      1.37 

60,000    3.29 

95,000    5.21 

26,000      1.42 

61,000    3.34 

96,000    5.26 

27,000      1.48 

62,000    3.40 

97,000    5.32 

28,000      1.53 

63,000    3.45 

98,000    5.37 

29,000      1.59 

64,000    3.51 

99,000    5.42 

30,000      1.64 

65,000    3.56 

100,000    5.48 

BANKING   DEPARTMENT  73 

relieve  the  company  from  liability  for  errors  not  reported  by  the  de- 
positor within  a  given  time.1 

Cancelled  checks  are  filed  alphabetically  and  are  returned  to  the 
depositor  each  time  the  pass  book  is  settled,  only  the  total  of  the  paid 
checks  being  entered  in  the  book,  while  the  separate  items  are  listed 
on  an  adding  machine  slip  which  is  returned  with  them. 

The  deposit  slips  are  generally  filed  alphabetically  and  for  given 
periods.  This  method  is  on  the  whole  more  satisfactory  than  filing 
each  day's  slips  together,  as  is  sometimes  done.  It  is  more  often 
necessary  to  refer  to  all  the  slips  of  a  given  account  than  to  a  day's 
work. 

Special  conditions  often  require  modifications  of  a  general  system, 
and  in  caring  for  special  sorts  of  accounts  it  is  sometimes  necessary 
to  provide  additional  machinery.  Thus,  inactive  accounts  may  be 
kept  in  a  supplementary  ledger,  the  total  only  being  carried  as  a 
single  item  in  the  main  ledger.  The  object  of  this  is  to  facilitate 
the  taking  off  of  trial  balances.  When  a  company  is  the  depository 
of  court  funds,  these  accounts  are  sometimes  carried  in  a  special 
ledger.  Such  exceptions  to  a  general  rule  or  system  should,  however, 
be  as  few  as  possible. 

When  an  overdraft  is  not  discovered  till  the  check  has  reached 
the  bookkeeper,  he  at  once  —  before  posting  —  reports  it  to  the 
paying  teller.  If  the  item  is  to  be  returned  unpaid,  the  cut  in  the 
check  is  guaranteed  by  the  teller  or  proper  officer,  and  it  is  sent 
back  to  the  bank  which  presented  it.  If  the  check  is  paid,  the  over- 
draft balance  is  posted  in  red  in  the  ledger,  and  the  depositor  is  notified. 
It  is  customary  to  have  a  printed  form  of  overdraft  notice,  often 
in  such  type  and  color  as  to  attract  attention  and  warn  the  depositor 
of  the  seriousness  of  the  offence.  It  is  wise  to  have  all  overdrafts 
posted  in  a  conspicuous  place  in  the  bookkeeping  or  tellers'  room, 
to  prevent  their  being  overlooked  or  forgotten. 

No  ledger  entry  should  be  permitted  without  the  proper  authority. 
This  authority  should  be  vested  in  some  officer,  but  not  in  either 
the  tellers  or  bookkeepers.  This  rule  should  also  apply  to  so-called 
"star  entries"  or  correcting  entries,  which  are  starred  on  both  sides 
of  the  account  in  the  ledger  to  indicate  that  the  item  is  not  to 

1  See  «  Cancelled  Bank  Checks,"  by  Charles  W.  Reihl.  The  Bankers'  Magazine, 
Vol.  LXIX,  p.  920. 


74  THE  MODERN  TRUST  COMPANY 

be  shown  in  the  pass  book  settlement.  Star  entries  are  often  used 
when  an  item  taken  as  cash  has  been  returned  unpaid  and  charged 
against  the  depositor's  account,  but  is  afterward  paid.  In  this  case 
the  original  entries  in  the  pass  book  and  ledger  stand,  while  the 
later  ones  charging  the  account,  and  again  crediting  the  item,  do  not 
appear  in  the  pass  book.  Deposit  and  charge  slips  used  for  these  pur- 
poses are  often  printed  with  a  large  red  star  to  indicate  their  nature. 

It  is  wise  to  carry  in  stock  an  assortment  of  check  books  varying 
in  size  from  fifty  to  five  hundred  checks  each.  Those  of  fifty  checks 
each  should  be  one  to  a  page,  attractively  bound  and  of  pocket  size. 
The  larger  books  should  have  two  or  three  checks  to  the  page.  By 
having  large  quantities  of  checks  printed  at  a  time,  the  cost  can  be 
kept  down  and  they  can  be  bound  as  needed. 

It  is  good  policy  to  be  liberal  in  the  matter  of  printing  the  deposi- 
tor's name  on  his  checks,  and  in  having  them  numbered.  The  ex- 
pense is  slight,  and  the  favor  conferred  is  generally  appreciated. 

When  the  depositor  insists  on  having  a  special  form  of  check, 
he  should  be  required  to  pay  for  it,  unless  the  size  of  the  account 
justifies  the  expenditure.  Included  among  the  standard  checks 
should  be  a  two  or  three  signature  form,  for  use  in  cases  where 
more  than  one  signature  is  required. 

It  is  a  growing  custom  among  business  houses  to  carry  columns 
in  their  cash  books  for  bank  deposits  and  checks,  thus  dispensing 
with  the  use  of  the  check-book  stub.  Expense  can  be  saved  by 
providing  checks  either  loose  or  in  pads  for  such  depositors.  Other 
business  firms  use  their  own  forms  of  voucher  or  voucher  check  in 
the  payment  of  their  accounts. 

RESERVES 

"I  was  one  of  those  who  had  the  fallacious  notion  that  ten  or  twenty 
per  cent  cash  in  bank  was  just  as  good  as  in  your  vaults.  I  have  had 
practical  experience  that  in  one  hour  —  yes,  in  half  an  hour  — 
disillusioned  me  of  that  notion.  In  half  an  hour  there  were  500 
people  at  the  doors  of  the  institution  that  I  have  the  honor  to  repre- 
sent, demanding  their  money,  and  in  another  hour  there  were  5000. 
And  that  reserve  which  we  have  all  been  shooting  at,  which  was 
a  thousand  miles  away,  was  mighty  poor  satisfaction  to  the  fellow 


BANKING  DEPARTMENT  75 

who  had  his  money  in  our  institution."1  Plain  words,  these,  and 
fearless,  to  be  spoken  by  a  successful  trust  company  president  in  a 
gathering  of  trust  company  representatives.  And  the  fact  that  the 
panic  was  successfully  averted  does  not  lessen  the  force  of  his  state- 
ment. 

A  trust  company  which  does  not  receive  deposits,  but  confines 
itself  to  corporate  and  individual  trust  business,  has  small  need  of 
a  cash  reserve.  Almost  all  trust  companies,  however,  receive  de- 
posits payable  on  demand,  and  do  more  or  less  general  banking, 
and  the  question  of  reserves  is  as  vital  to  them  as  to  the  banks. 

In  order  of  availability  in  time  of  need,  the  reserves  of  a  trust 
company  may  consist  of  cash  on  hand,  cash  on  deposit  elsewhere, 
demand  loans,  and  investment  securities. 

The  great  majority  of  everyday  transactions  are  in  credits,  not 
money.  So  long  as  public  confidence  remains,  the  cash  itself  is  not 
thought  of  —  this  confidence  lost,  a  panic  results,  and  nothing  but 
the  actual  cash  will  suffice. 

The  danger  of  a  trust  company's  depending  entirely  on  its  balances 
carried  elsewhere  is  that  panics  are  apt  to  occur  in  times  of  money 
stringency,  when  the  banks  themselves  may  find  it  difficult  to  meet 
sudden  calls  for  large  amounts.  "The  experience  of  1893  suffi- 
ciently proved  the  system  of  redepositing  bank  reserves  in  other 
banks,  subject  to  demand,  to  be,  as  Professor  Amasa  Walker  de- 
scribed it  many  years  ago,  the  most  explosive  element  in  American 
banking."  2  Some  financial  institutions  carry  deposit  accounts  in 
other  cities  as  an  offset  to  local  conditions.  Another  expedient  is 
to  open  a  special  gold  account  with  a  national  bank,  the  deposit  being 
returnable  on  demand  and  in  kind.  A  small  return  is  received  on 
the  amount  of  the  deposit,  and  the  gold  may  be  considered  as  part 
of  the  reserve  of  both  bank  and  trust  company.  This  plan,  too, 
has  its  weakness  in  time  of  panic.  Nothing,  after  all,  gives  such  a 
sense  of  security  as  knowing  that  an  adequate  cash  reserve  is  in 
the  company's  own  vault,  available  for  any  emergency  which  may 
arise. 

If  a  cash  reserve  is  a  necessity  for  institutions  in  the  national 
banking  system, — and  this  fact  is  universally  admitted, — there  seems 

1  Transactions  Trust  Company  Section,  American  Bankers'  Association,  1904. 

2  Alexander  D.  Noyes,  Political  Science  Quarterly,  Vol.  XVI,  pp.  248-261. 


76  THE  MODERN  TRUST  COMPANY 

to  be  every  reason  why  the  trust  companies  should  be  required  to 
carry  fixed  reserves  in  their  own  vaults,  not  so  large  as  the  national 
banks,  because  their  accounts  are  far  less  active,  but  commensurate 
with  safety  and  sound  banking  principles.  There  can  probably  be 
no  uniform  standard  for  the  whole  country,  but  the  states  in  which 
the  trust  companies  have  reached  the  highest  development  are  tak- 
ing independent  action  toward  this  end.  The  present  trend  of 
legislation  is  to  require  a  minimum  reserve,  and  such  laws  should  in 
the  end  benefit  the  trust  companies  and  make  for  financial  stability. 


CHAPTER  V 

BANKING   DEPARTMENT   (Continued} 
LOANS  AND  THEIR  RECORDS 

THE  profitable  employment  of  deposits  and  other  idle  funds  is 
an  important  phase  of  the  trust  company's  business.  If  interest  is 
allowed  on  deposits,  it  is  particularly  necessary  that  the  company 
should  be  receiving  an  adequate  return.  As  deposits  can  be  with- 
drawn at  will,  investments  which  have  a  long  period  to  run  can  be 
used  only  to  a  limited  extent.  The  larger  proportion  of  such  funds 
must  be  in  short-term  investments,  either  bonds  nearing  maturity  or,  as 
is  more  often  the  case,  loans  secured  by  collateral.  The  president  and 
board  of  directors  usually  make  general  rules  as  to  the  class  of  obliga- 
tion which  is  taken.  It  is,  of  course,  not  possible  for  these  officers 
to  pass  on  each  individual  transaction.  Subject  to  their  rulings,  the 
treasurer  is  responsible  for  the  making  of  loans.  In  large  companies 
even  this  officer  may  have  to  delegate  his  authority.  In  special 
cases,  where  good  loans  of  a  type  not  usually  accepted  are  offered, 
he  often  finds  it  wise  to  secure  the  approval  of  his  superiors  before 
making  a  final  decision. 

The  loan  clerk  is  intrusted  with  the  details  involved  in  the  making 
and  payment  of  loans,  changes  in  collaterals,  and  the  care  of  the 
securities  themselves.  The  position  is  an  exceedingly  responsible  one, 
and  demands  speed,  accuracy,  and  judgment,  as  well  as  familiarity 
with  the  fluctuations  of  the  market. 

It  is  customary  to  make  loans  either  " payable  on  demand"  or  for 
a  period  of  from  four  to  six  months,  although  occasionally  the  time 
is  extended  to  a  year  or  more.  It  is  the  part  of  wisdom  to  make  the 
period  moderately  short,  as  large  withdrawals  of  deposits  may  at 
any  time  necessitate  the  calling  in  of  loans.  Sometimes  the  com- 
pany itself  must  become  a  borrower  in  order  to  meet  large  payments 
when  money  is  scarce  and  a  sudden  contraction  of  its  loans  might 
have  disastrous  results.  The  use  of  clearing  house  certificates 
has  even  been  found  necessary  in  times  of  severe  financial  stringency. 

77 


78  THE  MODERN   TRUST  COMPANY 

In  New  York  a  demand  loan  is  understood  to  mean  just  what 
the  term  expresses,  —  an  obligation  payable  without  notice,  according 
to  the  will  of  either  lender  or  borrower,  which  not  only  can  but  quite 
probably  will  be  called,  and  when  this  happens  payment  must  be 
instantly  made.  In  other  parts  of  the  country,  the  right  to  call  de- 
mand loans  is  less  frequently  exercised.  Indeed,  certain  classes  of 
borrowers  seem  to  consider  that  a  demand  loan  gives  them  the  privi- 
lege of  payment  at  will,  but  denies  the  corresponding  right  to  the 
lender.  Where  this  is  the  case,  a  higher  rate  should  always  be 
charged  than  for  a  strictly  call  loan,  as  the  obligation  is  really  a 
time  contract  for  an  indeterminate  period. 

When  loans  are  to  be  called,  the  borrower  should  be  given  as 
long  notice  as  possible ;  for  when  funds  are  scarce,  even  the  strongest 
house  may  find  that  it  takes  time  to  get  the  required  sum.  Judg- 
ment should  be  used  in  deciding  which  loans  to  call,  and  the  amount 
needed  should  be  divided  pro  rata  among  a  number  of  borrowers 
rather  than  obtained  by  calling  in  the  entire  loans  of  a  few. 

The  practice  of  discounting  paper  varies  not  only  among  different 
trust  companies  but  in  various  sections  of  the  country.  Where 
trust  companies  act  under  a  general  banking  law  giving  wide  powers 
and  enabling  them  to  transact  a  commercial  banking  business,  dis- 
counting of  unsecured  paper  is  frequent.  In  other  states  it  is  not 
permitted,  although  practically  the  same  result  is  often  obtained 
through  the  purchase  from  a  third  party  of  notes  which  have  already 
been  discounted.  This  difference  is  recognized  by  the  laws  of  certain 
states.  In  a  legitimate  trust  business  great  care  must  be  taken  to 
avoid  unnecessary  risks,  and  it  is  a  safe  rule  not  to  discount  paper 
beyond  a  very  limited  extent,  and  then  only  when  the  maker  is 
undoubtedly  good  for  many  times  the  value  of  his  obligation.  If 
funds  can  be  otherwise  employed,  the  discounting  of  unsecured 
paper  should  be  avoided,  both  on  account  of  the  risks  involved  and 
because  this  class  of  business  more  properly  belongs  to  the  banks, 
which  are  better  fitted  to  care  for  it. 

In  loaning  on  collateral,  the  two  important  considerations  are 
the  marketability  of  the  collateral  and  the  name  of  the  maker  of  the 
note.  Loans  should  never  be  made  to  irresponsible  people  or  to 
strangers.  The  danger  of  loss  from  loaning  on  forged  or  stolen 
securities  is  practically  eliminated  when  the  borrower's  name  as  well 


BANKING  DEPARTMENT  79 

as  his  collateral  is  of  value.  On  the  other  hand,  the  borrower  should 
remember  that  when  he  borrows  and  the  note  includes  a  clause  per- 
mitting rehypothecation,  as  it  usually  does,  he  surrenders  his  securities 
to  the  lender,  who  may  dispose  of  them  without  the  knowledge  of 
the  trusting  client.  It  is  therefore  as  much  to  the  advantage  of  the 
borrower  to  deal  with  a  thoroughly  responsible  lender  as  it  is  to  the 
trust  company  to  have  only  reputable  names  on  its  loan  ledger.  The 
most  desirable  borrowers  are  usually  bankers,  brokers,  and  those  en- 
gaged in  railroad,  commercial,  or  other  legitimate  enterprises.  The 
speculator  should  be  handled  with  care,  and  his  line  of  loans  should 
never  be  allowed  to  exceed  an  amount  for  which  he  is  undoubtedly 
good.  In  times  of  inflation,  particularly,  future  bad  losses  can  very 
easily  be  contracted  by  loaning  too  largely  to  individuals  who  have 
not  sufficient  capital  to  finance  the  operations  for  which  they  have 
become  responsible. 

Loans  to  officers  or  directors  are  to  be  avoided,  and  when  made 
should  be  of  moderate  amounts  and  so  amply  protected  that  there 
can  be  no  criticism  from  any  source.  Some  of  the  worst  failures  of 
financial  institutions  have  been  caused  by  loaning,  directly  or  in- 
directly, to  those  connected  with  the  company.  The  laws  of  some 
states  require  all  such  loans  to  be  reported  to  the  State  Banking 
Department,  and  specify  an  amount  which  shall  not  be  exceeded.  The 
law  usually  provides  that  such  loans  must  not  be  greater  than  a 
given  percentage  of  the  capital  stock. 

In  the  selection  of  collateral,  care  should  be  taken  to  see  that  it 
either  has  intrinsic  value  or  else  that  it  can  be  readily  sold.  For 
collateral  purposes  it  is  not  necessary  to  know  so  precisely  the  intrinsic 
value  of  the  security  as  when  purchasing  outright  for  permanent 
investment.  Marketability  is  the  chief  factor,  as  in  case  of  de- 
fault the  collateral  would  be  sold  at  once.  A  security  that  has  a 
broad  market  is  the  best  type  of  collateral.  Thus  thousands  of 
shares  of  a  good  railroad  stock  can  generally  be  sold  without  materially 
affecting  the  price,  while  the  forced  sale  of  issues  which  are  little 
known  may  cause  the  price  to  break  many  points  in  transactions 
involving  but  a  small  number  of  shares. 

It  is  a  great  help  in  making  loans  to  have  fixed  rules  as  to  the 
character  of  the  collateral,  and  the  amount  of  a  given  security  which 
the  company  is  willing  to  carry  at  any  one  time.  Speculative  securi- 


80  THE   MODERN   TRUST   COMPANY 

ties  can  be  taken  with  safety  only  when  the  margin  is  sufficient  to 
admit  of  a  sudden  great  fall  in  price.  Securities  of  this  sort  should 
be  marked  at  a  low  figure,  and  too  large  an  amount  of  any  one  issue 
should  not  be  accepted.  There  may  even  be  danger  in  loaning  too 
great  an  amount  on  inactive  stocks  which  have  undoubted  value  but 
a  very  limited  market.  In  case  of  default  of  a  demand  loan  so  secured, 
the  holder,  in  order  to  prevent  loss,  may  be  forced  to  buy  in  the 
collateral  and  to  hold  it  for  an  indefinite  period  as  an  investment. 
In  the  same  way,  loans  with  mortgages  on  real  estate  as  collateral 
security  must  be  classed  among  the  investments  not  readily  con- 
vertible into  cash  in  time  of  panic  or  sudden  need. 

In  this  country,  railroad  corporations  doing  an  interstate  business 
are  required  by  law  to  make  fuller  reports  than  are  corporations 
doing  an  industrial  or  manufacturing  business.  The  earnings  of 
a  railroad,  too,  are  not  likely  to  fluctuate  as  violently  as  those  of 
an  industrial  concern.  Hence  railroad  securities  form  one  of  the 
most  desirable  classes  of  collateral.  The  securities  of  recently  formed 
corporations  should  be  loaned  on  to  a  very  limited  extent  until  the 
business  is  firmly  established  and  has  given  undoubted  proof  of 
its  profitable  nature.  Unfortunately,  the  declaration  of  dividends 
does  not  always  mean  that  they  have  actually  been  earned.  A  cer- 
tain conservative  trust  company  that  declined  to  loan  on  any  but 
dividend-paying  stocks,  not  only  limited  itself  very  greatly  in  the 
choice  of  collateral,  but  had  adopted  a  poor  test  of  value,  as  the  burst- 
ing of  more  than  one  iridescent  bubble  has  proved.  Except  when 
the  security  is  of  undoubted  value,  mixed  collaterals  should  be  pre- 
ferred to  large  amounts  of  a  single  kind. 

The  loaning  officer  should  be  in  close  touch  with  market  values,  and 
have  every  facility  for  securing  prompt  and  accurate  information. 
A  stock  ticker  should  be  within  easy  reach,  and  be  supplemented  by 
"inside"  information,  for  stock  quotations  by  themselves  may  prove 
anything  but  safe  guides.  The  operations  of  a  bull  or  bear  pool 
may  give  the  market  a  fictitious  appearance,  and  a  "wash  sale"  may 
fix  the  quotations  in  order  to  regulate  loaning  values,  when  to  find  a 
real  purchaser  the  limit  would  have  to  be  dropped  many  points. 

In  times  of  panic  and  violent  fluctuations  in  price,  the  situation 
should  be  closely  followed  and  additional  collateral  be  called  for  as 
necessary.  If  the  borrower  is  financially  sound,  his  margin  can 


BANKING  DEPARTMENT  8 1 

be  allowed  to  drop  considerably  without  fear  of  loss.  With  small 
borrowers  and  those  who  have  exhausted  their  supply  of  available 
collateral,  prompt  and  decisive  measures  must  be  adopted.  To 
take  the  first  loss  is  often  in  the  end  best  for  all  concerned.  Delay 
in  selling  out  a  weak  loan  through  consideration  for  the  borrower 
may  be  misplaced  kindness.  Sentiment  is  out  of  place  in  a  falling 
market. 

The  amount  of  margin  which  is  required  varies  with  the  sort  of 
collateral.  Thus,  it  is  perfectly  safe  to  loan  very  nearly  the  full 
market  value  of  government  bonds,  and  of  most  state  and  municipal 
securities.  First  mortgage  railroad  bonds  can  also  be  taken  at  a 
higher  valuation  than  stock  and  other  securities  readily  marketable, 
perhaps,  but  of  less  certain  value.  If  the  collateral  is  composed 
entirely  of  speculative  stocks,  a  sudden  break  in  the  market  may  in 
a  few  hours  —  and  before  there  is  an  opportunity  to  sell  —  turn  a 
comfortable  margin  into  an  actual  loss.  In  figuring  margins  it  is 
important  to  bear  in  mind  that  in  times  of  contraction  in  values, 
when  securities  are  selling  at  a  low  level,  a  margin  may  be  safe  which 
in  times  of  inflation  and  prosperity,  when  high  records  are  being 
made,  would  be  entirely  insufficient  to  assure  safety.  In  the  former 
case,  prices  will  probably  stay  within  a  moderately  narrow  range, 
while  in  the  latter  a  sudden  large  shrinkage  may  occur. 

In  New  York  two  tests  are  applied  to  a  collateral  loan,  the  first 
requiring  that  the  value  of  the  securities  must  have  a  margin  equal 
to  20  per  cent  above  the  amount  of  the  loan,  and  the  second,  that  the 
loan  must  have  10  points  margin,  that  is,  that  the  amount  loaned 
must  be  $10  per  share  less  than  the  market  price  of  the  stock.  This 
is  reckoned  by  dividing  the  number  of  shares  of  stock  (or  if  bonds, 
$10,000  are  equivalent  to  100  shares  of  stock)  into  the  margin.  For 
example,  if  there  were  2000  shares  of  mixed  stocks  in  a  loan  of 
$100,000,  divide  this  number  of  shares  into  $20,000  (the  20  per  cent 
margin),  and  the  result  shows  an  average  margin  of  10  points  on 
each  share  held.  If  the  lo-point  rule  is  strictly  adhered  to,  it  has 
the  effect  of  discriminating  against  low-priced,  non-dividend-paying 
stocks,  while  the  20  per  cent  clause  requires  an  ample  margin  on 
high-priced  stocks.  There  are  a  few  institutions  in  New  York  which 
require  nearly  15  points  with  the  20  per  cent  margin,  and  some  which 
do  not  adhere  strictly  to  the  lo-point  requirement.  Outside  of  New 


82  THE   MODERN  TRUST   COMPANY 

York,  the  10- point  margin  test  is  not  often  applied,  the  usual  require- 
ment being  simply  20  per  cent  margin  on  good  mixed  collaterals. 

In  loaning  it  is  usual  to  have  a  form  of  note  which  gives  the  lender 
every  possible  advantage  over  the  borrower,  and  leaves  no  loophole 
by  which  the  unscrupulous  may  attempt  to  avoid  payment.  The 
form  of  note  here  given  embodies  the  provisions  which,  with  varied 
wording,  are  found  in  the  notes  used  by  trust  companies.  The  note 
should  always  be  carefully  filled  in  so  that  there  may  be  no  question 
at  a  later  date  as  to  any  of  the  figures  or  descriptions  which  appear 
on  the  obligation.  The  loan  clerk,  before  the  money  is  paid  out, 
makes  a  careful  examination  of  the  note,  the  collaterals,  and  the 
powers  of  attorney  accompanying  securities  not  payable  to  bearer. 
With  stock  exchange  collaterals  it  is  essential  that  the  securities  and 
powers  of  attorney  should  be  in  such  shape  as  to  constitute  a  "good 
delivery,"  so  that  in  case  of  necessity  they  can  be  readily  sold.  A 
state  bank  examiner  in  visiting  a  newly  organized  trust  company 
was  astonished  to  find  that  there  was  not  a  single  power  of  attorney 
with  any  of  the  loans.  On  questioning  the  treasurer  he  found  that 
this  officer  fondly  imagined  that  the  note  gave  all  the  required  powers, 
and  had  not  at  all  considered  the  possible  need  of  making  a  transfer 
in  case  of  sale.  After  the  situation  had  been  explained,  the  treasurer 
offered  to  have  his  counsel,  who,  it  seems,  had  approved  his  methods  of 
loaning,  prepare  "some  sort  of  a  paper"  to  accompany  the  loans.  He 
was  not  a  little  surprised  to  hear  that  such  a  paper  formed  an  important 
part  of  the  equipment  of  every  bank  and  broker's  office,  and  that 
he  could  obtain  from  his  stationer  an  irrevocable  power  of  attorney 
probably  quite  as  effective  as  any  document  his  counsel  could  devise. 

The  bookkeeping  methods  of  the  loan  department  should  be  as 
simple  as  possible.  The  following  system  furnishes  an  easy  and 
accurate  method  and  involves  no  unnecessary  labor. 

The  machinery  of  the  loan  department  consists  of  the  loan  ledgers, 
a  collateral  record,  and  a  collateral  index.  The  ledgers  and  collateral 
records  should  be  of  the  loose-leaf  type.  Many  companies  combine 
the  loan  ledger  and  collateral  record.  It  seems  better,  however, 
especially  in  the  larger  companies,  to  separate  them,  as  the  recording 
of  loans  and  interest  and  of  collateral  changes  are  two  entirely  dis- 
tinct operations. 

A  bound  accession  book  is  a  valuable  aid  and  should  also  be  used. 


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84  THE  MODERN  TRUST  COMPANY 

This  book  contains  columns  for  the  date,  name  of  the  borrower, 
kind  of  loan,  rate  of  interest,  description  of  collateral  delivered  or 
amount  of  cash  paid  out,  followed  by  similar  columns  covering  the 
description  of  collateral  or  cash  received.  Then  comes  a  series  of 
narrow  vertical  columns  in  which  the  loan  clerk  places  his  initials 
as  he  makes  the  proper  entries  in  the  various  books. 

In  the  accession  book  each  new  loan  is  recorded,  with  each  item  of 
collateral  and  its  cash  value  separately  listed.  Every  payment  and 
all  changes  in  collateral  are  similarly  recorded.  From  this  record 
the  history  of  each  loan  can  be  traced. 

The  demand  loan  ledger  sheets  are  headed  with  the  borrowers' 
names,  and  are  arranged  alphabetically.  Following  the  title  of  the 
account  is  a  ruled  section,  occupying  the  upper  third  of  the  page 
and  devoted  to  the  record  of  principal  transactions.  The  columns  in 
this  section  from  left  to  right  comprise  the  date,  cash-book  folio,  loans, 
balance,  date,  cash-book  folio,  and  payments.  Each  borrower's 
loans  are  treated  as  a  running  account,  and  the  total  is  always  shown 
in  the  balance  column. 

The  lower  two-thirds  of  the  page  is  devoted  to  the  record  of  interest 
charges  and  payments.  The  columns  for  charges  are  headed :  from, 
to,  days,  on  loans  of,  rate,  and  interest ;  for  payments :  date,  cash-book 
folio,  and  amount.  Each  time  the  rate  of  interest  or  the  principal  of 
the  loan  changes,  the  facts  are  noted  and  the  necessary  calculations 
are  made,  thus  keeping  the  clerical  work  at  all  times  up  to  date,  and 
leaving  but  one  computation  to  be  made  in  each  open  account  at  the 
close  of  an  interest  period  or  when  the  loan  is  paid  off.  The  demand 
loan  sheets  are  ruled  alike  on  both  sides,  and  when  filled  or  when 
the  loan  is  paid  they  are  placed  in  a  transfer  binder.  When  a  new 
loan  is  made  to  the  same  borrower,  the  sheet,  unless  full,  is  again 
transferred  to  the  current  binder.  Bills  for  interest  on  demand  loans 
are  rendered  at  stated  periods,  and  borrowers  are  encouraged  not  to 
make  interest  payments  when  making  part  payments  on  account  of 
principal,  although  if  desired  this  can  readily  be  done,  and  the  amount 
so  paid  will  show  as  a  payment  offsetting  the  accrued  interest. 

In  computing  interest  on  loans,  the  actual  number  of  days  is 
taken.  If  the  day  on  which  the  loan  was  made  is  included,  the  day 
of  payment  is  not  counted.  These  interest  calculations  are  usually 
based  on  a  year  of  three  hundred  and  sixty  days.  When  marking 


LOAN  ACCESSION  BOOK 


HECUKIll    DKHVEKED 


Rate 


Description 


SECURITY  DEPOSITED 


Description 


Collators   Balance        Loan 
|  Bocord       Index      Indei     Envelop 


by 
Controller 


••naumm 

Date 

C.  B. 

folio 

Xotn* 

Balarce 

•Date 

AB. 

Polio 

«PW»«*« 

INTEREST 

Tram 

To 

Day. 

On  Loins  of  . 

Rate 

"Inter* 

1UYMB2JTS 

DM* 

S£ 

lAraooqr* 

86 


THE  MODERN  TRUST  COMPANY 


the  rate  of  interest  up  or  down,  the  bookkeeper  takes  the  demand 
loan  ledger  and  in  the  interest  section  he  enters  the  date  of  the 
change,  the  new  rate,  and  the  amount  of  the  loan.  At  the  same 
time  an  assistant  fills  in  the  rate  of  interest  and  date  on  the  notifica- 
tion slip  which  is  sent  the  borrower.  By  having  a  set  of  envelopes 
already  addressed,  and  the  borrowers'  names  written  on  the  slips, 
it  is  possible  to  change  the  records  and  get  out  notices  very  ex- 
peditiously. 

Interest  bills  should  be  clearly  and  simply  drawn,  and  should 
give  the  figures  in  such  a  way  that  the  borrower  can  easily  verify 
them.  The  practice  in  some  trust  companies  of  treating  each  note 
separately,  instead  of  considering  the  whole  loan  as  a  running  account, 
is  confusing  and  adds  enormously  to  the  work  of  computing  interest. 
The  charges  on  the  interest  bill  correspond  exactly  to  the  figures  in 
the  demand  loan  ledger,  and  the  same  data  that  appears  in  the  ledger 
should  be  given  on  the  bill.  The  following  form,  or  some  modifica- 
tion of  it,  is  now  in  general  use:  — 


days1  interest  from 

to 

on 

@     % 

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tt 

@     % 

u         it         it 

u 

it 

@     % 

tt          it          tt 

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tt          u          it 

11 

u 

@     % 

In  the  case  of  time  loans,  a  notice  is  sent  the  borrower  shortly 
before  the  maturity  of  the  loan,  showing  the  amount  of  both  interest 
and  principal;  in  the  case  of  commercial  paper,  the  note  having 
already  been  discounted,  the  face  amount  alone  is  shown. 

For  time  loans,  a  modification  of  the  demand  loan  sheet  is  used. 
As  each  loan  runs  for  a  definite  period,  there  is,  except  in  the  case  of 
an  advance  payment  or  overdue  loan,  but  one  interest  calculation. 
When  it  is  desired  to  show  the  interest  accrued  upon  each  loan,  an 
entry  is  made  at  the  end  of  each  month  charging  the  interest  accrued 
for  that  month.  The  total  of  these  items  then  forms  the  basis  for 
the  entry  in  the  general  ledger  accounts.  The  columns,  which  run  the 
whole  length  of  the  sheet,  show  the  date  when  the  loan  was  made, 
the  date  when  due,  the  number  of  days,  the  rate  and  amount  of  the 


BANKING  DEPARTMENT 


interest,  the  cash-book  folio,  and  the  principal  of  the  loans.  The  ag- 
gregate of  the  open  items  in  the  principal  column  on  all  the  time  loan 
sheets  is  in  balance  with  the  time  loan  account  in  the  general  ledger. 
The  remaining  columns  are  devoted  to  the  payments  received,  showing 


TIME  LOANS 

Made 

Due 

Days 

Rate 

Interest 

c.B.       T 

Folid        L 

PAYMENTS 

00.113 

Date 

ftfc  mi 

terest       L 

oans 

the  date,  cash-book  folio,  amount  of  interest,  and  finally  the  principal 
paid.  Both  sides  of  the  sheets  are  ruled,  and  current  and  transfer 
binders  are  used  as  in  the  case  of  the  demand  loans. 

For  commercial  paper,  a  slightly  different  ruling  is  used,  as  the 
discount  is  deducted  when  the  paper  is  bought,  instead  of  interest 
being  paid  at  the  maturity  of  the  loan  as  is  generally  the  case  with 


88  THE  MODERN  TRUST  COMPANY 

time  loans.  The  form  is  also  varied  slightly,  depending  on  whether 
the  law  permits  the  company  to  discount  directly,  or  requires  the 
paper  to  be  bought  after  it  is  discounted,  and  accompanied  by  a  bill 
of  sale.  In  the  latter  case,  the  sheet  —  arranged  somewhat  similarly 
to  the  time-loan  sheet  —  would  provide  a  record  for  the  date  when 
bought,  from  whom  bought,  due,  principal,  payments,  showing  date 
and  amount,  followed  by  a  section  for  "  discount "  in  which  columns 
are  provided  for  date,  days,  rate,  accrued,  and  payments. 

Where  a  trust  company  discounts  paper  directly,  this  form  does 
not  apply.  In  such  case  the  methods  described  in  books  on  general 
banking  should  be  adopted. 

The  sheets  in  the  collateral  record  are  arranged  alphabetically, 
according  to  the  borrowers'  names,  with  a  cross  index,  if  necessary, 
arranged  as  to  due  dates  of  time  loans  and  bills  receivable.  The 
heading  of  the  sheet  shows  the  name  of  the  borrower,  and,  in 
pencil,  the  total  amount  of  his  loans.  The  remainder  of  the  sheet 
and  its  other  side  are  devoted  to  an  itemized  description  of  the  col- 
laterals. Columns  are  provided  for  the  number  of  shares,  the  par 
value  of  bonds,  the  description  of  the  security,  the  rate,  and  the  total 
market  value.  The  last  two  can  be  noted  in  pencil  as  they  are 
frequently  altered.  The  stocks  should  be  listed  alphabetically  when 
the  loan  is  made,  and  space  should  be  left  for  additional  items ;  the 
bonds,  similarly  listed,  should  follow. 

The  collateral  index  or  line  ledger  is  a  cross  index  of  the  collateral 
record,  arranged  as  to  securities,  and  is  kept  so  that  the  total  amount 
of  each  kind  of  collateral  may  be  quickly  ascertained,  both  to  prevent 
taking  too  large  a  quantity  of  any  given  security  and,  in  case  of  a 
drop  in  price,  to  locate  rapidly  the  various  loans  affected.  This 
record  can  be  kept  on  cards  or  sheets:  on  the  latter  the  totals  can 
be  added  more  quickly;  the  cards  have  the  advantage  of  containing 
no  "dead"  matter.  When  cards  are  used,  a  blue  card  describing 
the  security  comes  first  and  is  followed  by  white  cards  giving  the 
name  of  each  borrower  in  alphabetical  order  and  the  amount.  Where 
sheets  are  used,  the  description  of  the  security  is  given,  followed  by 
the  list  of  borrowers  and  the  amount  of  the  security  with  each  loan. 
The  arrangement  in  both  cases  is  primarily  as  to  the  security,  and 
secondly  as  to  the  borrower. 

Whenever  substitutions  of  collateral  are  made,  receipts  are  taken 


COLLATERAL  JRECORD 
LOANS  TO 

DEMAND  $                     TIME  $                  TOTAL  $ 

Shares 

Bonds 

Security 

Price 

Market 
Value 

89 


90  THE  MODERN  TRUST  COMPANY 

on  a  "change  slip"  which  shows  the  description  and  value  of  both 
the  collateral  withdrawn  and  that  deposited  in  its  place,  with  a 
statement  that  the  new  securities  are  subject  to  all  the  provisions 
under  which  the  original  collateral  was  deposited. 

The  arrangement  of  the  notes  and  collaterals  is  often  considered 
a  matter  of  trifling  importance,  and  they  get  little  care  after  they  are 
once  securely  locked  within  the  vault.  The  usual  practice  is  to  put 
both  note  and  collaterals  in  an  envelope,  or  to  tie  bulky  securities  in 
a  bundle.  It  is  more  satisfactory  to  keep  both  notes  and  collat- 
erals flat  in  portfolios.  These  should  be  made  of  two  pieces  of  tar 
board,  loj"  x  15^",  and  should  be  held  together  by  two  loose  straps 
of  webbing,  fastened  with  ordinary  buckles.  Manila  sheets  a  trifle 
smaller  than  the  outer  boards  are  used  to  separate  the  loans  of 
the  various  borrowers  in  each  portfolio. 

The  closets  in  the  vault  devoted  to  the  loans  should  have  shelves 
about  4j"  apart,  on  each  of  which  a  portfolio  rests.  On  the  out- 
side of  the  closet  door  should  be  large  letters  showing  the  loans  con- 
tained in  the  closet,  all  of  which  are  arranged  alphabetically.  The 
portfolios  are  given  consecutive  numbers,  and  inside  the  closet  door 
is  an  index  list  of  the  alphabetical  divisions  in  each  portfolio.  Within 
the  portfolio,  each  sheet  bears  on  the  right-hand  lower  corner  the 
name  of  the  borrower,  and  as  it  is  in  its  alphabetical  place,  the  loan 
can  be  quickly  found. 

Each  borrower  has  an  envelope,  on  which  appear  his  name,  the 
total  amount  of  his  demand  loans  and  time  loans,  and  a  list  of  his 
collaterals.  Within  this  envelope  the  various  notes  are  kept.  When 
payments  on  account  are  made,  either  a  note  of  corresponding  amount 
is  cancelled  or  the  credit  is  indorsed  on  one  of  the  notes. 

Below  the  envelope,  flat  and  arranged  alphabetically  according  to 
the  name  of  the  security,  come  the  certificates  of  stock,  then  reorgani- 
zation and  other  receipts,  and  at  the  bottom,  bonds,  divided  into 
coupon  and  registered,  also  alphabetically  arranged.  All  the  col- 
laterals belonging  to  a  borrower  should  be  kept  together.  When 
figuring  margins,  the  total  amount  of  the  loans,  irrespective  of  whether 
they  are  demand  or  time  loans,  and  the  total  value  of  the  borrower's 
collaterals  are  considered,  because  under  the  terms  of  the  notes  the 
collaterals  pledged  with  any  one  note  are  equally  applicable  to  all 
other  outstanding  loans. 


SUBSTITUTION  OF  COLLATERAL 

190 


Received  from  THE  MODERN  TRUST  COMPANY 
the  following  Securities: 


MARKET  VALUE 
@  '  $ 


@ 


@ 


@ 


@ 


Total    $ 


And  deposited  in  lieu  thereof,  subject  to  the  same  terms  and  conditions  as 
collateral  originally  pledged: 

@ $ 

@ 

@ 

@ 

@ 


Total    $ 


92  THE  MODERN  TRUST  COMPANY 

By  keeping  the  portfolios  moderately  small  and  having  a  few  extra 
ones  in  each  closet,  the  system  can  be  made  to  adjust  itself  easily 
to  the  changes  which  are  constantly  occurring. 


MONEY  RATE 

The  general  public  understands,  more  or  less  clearly,  that  the 
prices  of  most  commodities  are  fixed  by  conditions  of  supply  and 
demand,  influenced  by  competition  and  various  other  factors. 

When  the  commodity  is  money,  however,  more  mystery  seems 
to  attach  to  the  matter,  and  when  the  rate  of  interest  to  be  charged 
on  a  loan  is  quoted  with  promptness,  the  individual  borrower  is  often 
puzzled  to  know  how  the  proper  figure  was  decided  on. 

Speaking  broadly,  the  laws  of  supply  and  demand  govern  the 
price  of  money.  In  England,  the  bank  rate,  fixed  by  the  Bank  of 
England,  determines  the  exact  figures.  When  the  Bank  of  Eng- 
land finds  its  reserve,  which  is  practically  the  reserve  of  the  nation, 
being  drawn  on  too  heavily,  it  raises  the  rate  at  which  it  is  willing 
to  loan,  and  this  has  a  tendency  to  lessen  the  demands  on  it.  On 
the  other  hand,  when  the  supply  of  idle  money  accumulates  too 
rapidly,  the  rate  is  lowered  in  order  to  attract  borrowers. 

In  this  country,  there  is  no  single  institution  corresponding  to 
the  Bank  of  England.  The  government  keeps  its  reserve  partly 
in  its  own  vaults  and  partly  on  deposit  in  the  national  banks.  The 
rate  for  money  is  determined  by  the  large  financial  institutions  in 
the  money  centres,  between  which  there  is  often  a  community  of 
interest,  if  no  closer  relation.  It  may  be  possible  to  hold  a  fictitious 
rate  for  some  time  through  a  common  agreement  on  the  part  of  the 
chief  lenders,  but  the  price  will  always  adjust  itself  in  the  end.  Where, 
as  in  New  York,  funds  are  offered  at  the  money  post  on  the  stock  ex- 
change, it  is  the  bidder  who  fixes  the  rate.  New  York,  being  the  chief 
money  centre  of  the  United  States,  regulates  in  a  general  way  the 
price  of  money  in  all  the  other  financial  centres.  When  there  is  a 
good  demand  in  New  York,  rates  advance  and  idle  funds  are  attracted 
from  the  interior.  When  rates  fall,  money  is  withdrawn. 

The  rates  for  call  and  time  loans  which  are  published  in  the 
newspapers  often  show  considerable  variations  at  different  places: 
these  figures  are  for  brokers'  loans,  and  the  rates  charged  private 


BANKING  DEPARTMENT  93 

individuals  are  usually  somewhat  higher  according  to  the  amount 
and  character  of  the  loan.  Individual  borrowers  sometimes  feel 
that  they  are  unfairly  treated  in  being  charged  more  than  the  pub- 
lished ruling  rate  for  money,  when,  as  a  matter  of  fact,  they  would 
be  quite  unwilling  to  borrow  on  the  "quick  call"  terms  which  are 
acceptable  to  the  brokers,  who  have  better  facilities  for  securing 
funds  at  short  notice. 

The  prevailing  rate  is  changed  either  by  the  lenders  one  by  one 
advancing  or  lowering  the  figures,  or  by  their  acting  in  concert  and 
changing  the  rate  simultaneously.  The  rate  of  interest  on  a  time  loan 
is  fixed  by  agreement  when  the  loan  is  made.  In  the  case  of  call 
loans,  when  the  rate  is  advanced  the  lenders  notify  the  various  bor- 
rowers of  the  change.  When  it  is  lowered,  the  lender  either  sends 
out  notices  in  the  same  way  or  waits  for  the  borrowers  to  request  a 
reduction  in  rate.  One.  method  of  maintaining  a  high  rate  in  any 
particular  place  is  to  send  surplus  funds  elsewhere,  often  to  be  loaned 
out  at  a  much  lower  figure.  The  lenders  naturally  wish  to  use  their 
funds  so  as  to  produce  the  largest  possible  return,  but  such  a  practice 
is  sure  to  react  in  the  long  run  and  injure  the  commercial  standing 
of  the  community.  So  large  a  proportion  of  business  is  done  on 
borrowed  money  that  the  merchant  or  manufacturer  who  can  procure 
funds  most  cheaply  has  a  decided  advantage  over  his  competitors  who 
are  forced  to  pay  more,  and  the  short-sighted  policy  of  withdrawing 
funds  from  the  home  community  inevitably  tends  to  drive  business 
elsewhere. 

INVESTMENTS 

A  trust  company  is  known  by  the  securities  it  buys. 

Part  of  its  capital  is  usually  invested  in  the  real  estate,  building, 
and  equipment  necessary  for  the  transaction  of  the  business.  The 
remainder  of  the  capital  and  the  surplus  form  a  permanent  fund  which 
can  be  invested  in  a  very  different  class  of  securities  from  those  in 
which  deposits  and  other  moneys  liable  to  withdrawal  at  short  notice 
are  invested.  Being  liable  for  the  acts  of  the  company,  the  capital 
and  surplus  constitute  a  guarantee  of  corporate  responsibility. 

Only  a  few  of  the  states  regulate  by  charter  provisions  or  general 
statute  the  investment  of  a  trust  company's  own  funds.  The  restric- 
tion most  often  found,  which  applies  to  other  corporations  as  well  as  to 


94  THE   MODERN  TRUST  COMPANY 

trust  companies,  is  one  limiting  the  Amount  of  real  estate  which  can 
be  held.  Trust  companies  usually  are  allowed  to  buy  in  real  estate 
under  foreclosure  of  mortgages  or  other  obligations  in  order  to  avoid 
loss,  but  are  required  to  dispose  of  such  holdings  within  a  limited 
period.  This  restriction  is  sometimes  evaded  by  having  an  individual 
take  title  and  give  a  mortgage  for  the  full  consideration  or  cost  of 
the  property.  New  York,  Ohio,  and  a  few  other  states  specify  in 
general  statutes  the  character  of  trust  company  investments.  Most 
of  the  states  require  reports  of  condition,  including  lists  of  invest- 
ments, to  be  made  to  the  state  department  having  supervision.  The 
publication  of  these  reports  is  a  valuable  safeguard,  and  often  dis- 
courages the  purchase  of  questionable  securities. 

What  the  character  of  a  trust  company's  investments  should 
be,  depends  largely  on  the  kind  of  business  it  transacts.  The  trust 
company  which  does  principally  a  commercial  banking  or  corporate 
trust  business  can  take  risks  entirely  unjustifiable  for  a  company 
which  executes  chiefly  individual  trusts.  In  the  transaction  of  a 
commercial  banking  business  it  is  not  unusual  to  make  unsecured 
loans  and  to  underwrite,  in  whole  or  in  part,  issues  of  corporate 
securities.  Large  profits  have  been  made  in  this  way,  and  corre- 
sponding risks  have  been  taken. 

Where  a  trust  company  makes  a  specialty  of  the  care  of  estates, 
the  situation  is  very  different.  A  wealthy  man  about  to  appoint  a 
corporate  executor  or  trustee  will  want  to  know  how  the  company 
invests  its  own  funds.  The  laws  generally  do  not  require  bonds, 
as  in  the  case  of  individuals  acting  in  fiduciary  capacities.  It  is 
therefore  essential  that  the  company's  own  affairs  should  be  con- 
ducted with  extreme  caution,  and  the  character  of  its  investments 
be  strictly  scrutinized. 

Government,  state,  municipal,  and  standard  railroad  securities, 
and  well- secured  mortgages,  are  suitable  for  investment  purposes. 
The  securities  of  industrial  corporations,  being  more  liable  to  fluctu- 
ate in  value,  should  only  be  held  when  of  undoubted  worth.  Local 
conditions  also  have  a  bearing  on  the  question  of  investments,  and 
justify  the  purchase  of  different  sorts  of  securities  in  different  parts 
of  the  country. 

An  interest  should  never  be  taken  in  underwriting  syndicates 
unless  the  intrinsic  value  of  the  securities  has  already  been  demon- 


BANKING   DEPARTMENT  95 

strated.  Membership  in  a  syndicate  to  purchase  and  market  an 
issue  of  municipal  or  state  bonds,  or  the  underwriting  of  an  issue 
of  bonds  of  a  dividend-paying  railroad,  may  be  entirely  proper  if 
the  company  is  ready  to  hold  the  securities  underwritten  as  permanent 
investments  in  case  of  failure  to  dispose  of  them.  It  is  never  right 
to  assume  obligations  on  account  of  securities  of  questionable  value, 
or  of  companies  which  have  not  demonstrated  their  earning  powers. 
It  might  be  folly  to  buy  a  certain  security  selling  far  below  its  face 
value,  and  yet  become  the  part  of  wisdom  to  invest  in  that  same 
security  after  its  permanent  value  had  been  proved  —  even  if  the 
price  had  gone  up  many  points  in  the  interval. 

If  an  interest  is  regularly  taken  in  underwritings,  it  is  not  always 
possible  to  refuse  an  undesirable  offering,  lest  the  source  of  supply 
should  be  cut  off.  The  trust  companies  which  never  take  an  in- 
terest in  underwriting  syndicates,  and  there  are  such,  undoubtedly 
miss  opportunities  for  making  profits,  but  may  be  compensated 
by  avoiding  losses  from  depreciated  and  unmarketable  investments, 
and  by  the  deserved  reputation  and  increased  business  they  gain 
thereby.  Securities  which  the  company  would  hesitate  to  have 
known  were  in  its  vaults  should  under  no  circumstances  be  pur- 
chased. The  knowledge  that  a  trust  company  of  good  standing  has 
bought  a  block  of  bonds  will  often  sell  an  entire  issue.  The  brokers, 
knowing  well  that  no  more  forcible  argument  can  be  made  to  indi- 
vidual customers,  are  always  anxious  to  place  part  of  their  offerings 
in  strong  hands,  in  order  to  dispose  of  the  remainder  —  usually  at 
advanced  figures.  In  this  way  a  trust  company  assumes  a  respon- 
sibility which  reaches  far  beyond  its  own  customers.  A  trust  com- 
pany cannot  afford  to  be  discredited  in  the  eyes  of  the  public,  and 
errors  in  judgment  may  lead  not  only  to  direct  losses  but  to  dimin- 
ished prestige  and  a  consequent  withdrawal  of  business.  The  com- 
pany may  make  an  actual  profit  by  the  purchase  and  later  sale  of 
questionable  securities,  and  yet  incur  an  intangible  loss  far  greater, 
for  those  who  failed  to  sell  at  the  right  time  will  not  soon  forget  through 
whose  example  they  were  persuaded  to  buy.  The  best  securities 
are  none  too  good  for  a  trust  company's  assets. 

The  general  ledger  contains  accounts  showing  the  total  of  each 
class  of  investment,  while  auxiliary  ledgers  for  stocks,  bonds,  real 
estate,  etc.,  give  the  details  of  the  various  securities. 


96  THE  MODERN   TRUST   COMPANY 

A  form  of  investment  ledger,  either  bound  or  loose-leaf,  which  is 
suitable  for  all  sorts  of  securities,  has  a  space  at  the  head  of  each 
page  for  a  description  of  the  security  and  shows  the  rate  of  interest, 
when  payable,  basis  upon  which  purchased,  principal  due,  with  blank 
lines  for  other  data.  Below  follows  a  space  for  principal  transac- 
tions, with  columns  for  date,  par  value,  rate,  amount  paid,  balances 
showing  both  par  and  book  value,  date,  par  value,  rate,  and  amount 
received.  This  ruling  occupies  but  part  of  the  page,  the  lower  part 
being  devoted  to  interest  items.  Under  "interest,"  columns  headed 
"accrued"  and  "payments"  are  three  times  repeated,  and  each  is 
subdivided  into  "date"  and  "amount." 

The  relative  space  devoted  to  principal  transactions  and  interest 
items  is  regulated  by  the  character  of  the  investment.  For  permanent 
investments  the  principal  section  is  made  about  half  the  length  of  the 
interest  section,  and  as  the  latter  has  three  sets  of  columns,  there  are 
six  times  as  many  lines  for  interest  items  as  for  principal  transactions. 
When  this  form  of  ledger  is  used  for  temporary  investments,  the  page 
is  divided  in  half,  thus  giving  three  times  as  many  lines  to  interest 
£S  to  principal. 

In  buying  and  selling  securities,  it  is  important  to  distinguish 
between  principal  and  accrued  interest,  and  to  charge  or  credit  them 
to  their  proper  accounts.  If  the  accrued  interest  is  not  considered, 
the  books  may  seem  to  show  a  profit,  where  in  reality  there  has  been 
a  loss.  The  following  rules  have  been  used  satisfactorily  to  show  the 
true  condition  as  to  investments  and  the  income  therefrom :  — 

Compute  interest  on  the  issue  each  month  at  the  income  rate  or 
basis  on  which  the  bonds  have  been  purchased. 

For  example :  The  interest,  if  the  bonds  have  been  purchased  on 
a  4$>  basis,  to  be  calculated  during  the  first  interest  period  at  4^  of 
the  book  or  cost  value.  Subsequently  the  4$  will  be  calculated  on 
the  increased  (or  decreased)  book  value. 

Where  an  issue  of  serial  bonds  with  more  than  one  maturity  has 
been  purchased,  it  is  necessary  to  determine  by  calculations  covering 
the  bonds  of  each  maturity  the  income  basis  of  the  whole,  and  then 
proceed  as  above. 

When  the  semi-annual  or  quarterly  interest  payment  is  received, 
the  proportion  belonging  to  income,  as  ascertained  by  the  foregoing 
rule,  is  credited  to  income  and  the  proportion  belonging  to  principal 


1 


BANKING   DEPARTMENT  97 

is  credited  to  the  principal  account.  In  the  case  of  a  bond  bought 
below  par,  the  accrued  income  will  show  more  than  the  actual  inter- 
est received  and  the  principal  account  must  be  charged  with  the 
difference.  To  adjust  the  accrued  interest  and  the  principal  accounts, 
the  following  journal  entry  is  made  at  the  end  of  each  interest  period : 

(a)  "  Accrued  Interest,  Dr. 

To  Investments," 

or 

(£)  "  Investments,  Dr. 

To  Accrued  Interest," 

according  as  the  bonds  have  been  purchased  at  (a)  a  premium,  or  at 
(b)  a  discount. 

In  order  to  determine  the  return  from  each  class  of  investments, 
which  are  only  shown  in  aggregate  in  the  general  ledger,  a  supple- 
mentary distribution  book  is  used,  in  which  the  items  in  "interest 
accrued"  are  distributed  according  to  the  source  from  which  they 
come.  This  book  contains  a  date  and  total  column  followed  by 
separate  columns  for  the  interest  on  each  kind  of  investment :  stocks, 
bonds,  mortgages,  real  estate,  demand  loans,  time  loans,  commercial 
paper,  bank  balances,  etc.  Each  page  has  thirty-one  lines  numbered 
consecutively,  and  each  day's  receipts  are  entered  on  the  line  corre- 
sponding to  the  day  of  the  month.  The  distributed  items  settle  with 
the  figures  in  the  total  column.  At  the  end  of  the  month  the  totals 
are  shown  and  any  deductions  made.  The  net  totals  give  the  actual 
return  on  the  various  sorts  of  investments.  A  summary  of  the  monthly 
totals,  giving  the  return  for  each  year,  is  kept  at  the  back  of  the 
volume.  These  totals  can  be  worked  out  to  show  the  average  per- 
centage of  income  earned  on  each  class  of  loans  or  investments. 

The  securities  should  be  kept  in  a  fire  and  burglar  proof  vault, 
and  a  company  in  the  country  or  in  a  small  town,  which  does  not 
possess  adequate  safeguards  for  their  care,  should  keep  at  least  a  por- 
tion of  its  securities  in  a  safe  deposit  vault  in  some  large  city. 

Each  class  of  securities  should  be  separated  in  the  vault,  for 
convenience  in  handling.  Registered  and  coupon  bonds  and  stock 
certificates  should  be  kept  flat  in  portfolios.  The  registered  bonds  and 
stocks  should  be  arranged  in  alphabetical  order.  The  coupon  bonds 
should  be  divided  into  two  general  classes,  —  flat  bonds,  whose 
coupons  are  printed  on  the  same  sheet  as  the  bond  itself,  and  book 
H 


98  THE  MODERN   TRUST  COMPANY 

bonds,  in  which  the  coupons  and  the  bond  are  on  different  sheets  bound 
together.  This  distinction  is  made  simply  on  account  of  the  difference 
in  size  of  the  two  sorts  of  bonds.  Each  class  should  be  arranged 
primarily  as  to  interest  periods,  for  convenience  in  cutting  coupons. 
The  bonds  of  each  interest  period  are  arranged  alphabetically.  An 
index  shows  in  which  portfolio  any  given  security  can  be  found. 

Mortgages  are  kept  either  in  pasteboard  boxes,  expansion  enve- 
lopes, or  flat  in  portfolios. 

The  arrangement  of  securities  is  described  in  detail  in  connection 
with  the  trust  department.  * 

PURCHASE  AND  SALE  OF  SECURITIES 

Some  trust  companies  maintain  a  regular  department  for  the 
purchase  and  sale  of  securities;  many  occasionally  do  business  of 
this  sort  for  customers  and  friends;  while  others  execute  no  buying 
or  selling  orders  except  through  a  broker  and  make  no  charge  for 
the  service. 

In  some  places  the  trust  companies  do  not  engage  in  the  bond 
business,  in  order  not  to  antagonize  the  brokers  and  bankers,  who 
are  among  their  most  profitable  customers.  Where  a  trust  company 
does  engage  in  this  business,  and  particularly  when  it  can  state  that 
it  "offers  and  recommends  for  investment  only  such  bonds  as  it  has 
purchased  outright  after  thorough  investigation,  and  which  it  holds 
for  investment  on  its  own  account,"  it  is  likely  to  command  a  respect- 
ful hearing  from  investors.  If,  however,  it  undertakes  the  flotation 
of  projected  ventures  and  the  marketing  of  their  securities,  it  assumes 
a  responsibility  out  of  all  proportion  to  the  possible  gain. 

Few  investors,  except  among  the  very  rich,  make  adequate  ex- 
amination into  the  value  of  the  securities  which  they  buy,  and  the 
recommendation  of  a  trust  company  carries  considerable  weight. 
If  the  security  is  bought  and  later  depreciates  in  value,  the  trust  com- 
pany will  be  considered  partly  responsible  for  the  loss,  even  though 
no  legal  obligation  was  assumed.  On  the  other  hand,  a  bond  depart- 
ment may  be  made  not  only  a  profitable  part  of  the  business,  but  a 
means  of  attracting  customers  to  other  departments. 

The  question  of  investments  is  a  difficult  one,  and  it  is  often  a 
real  comfort  to  the  depositor  to  know  that  the  trust  company  where 

1  See  p.  159. 


BANKING   DEPARTMENT  99 

he  banks  and  keeps  his  safe  deposit  box  can,  in  its  bond  department, 
provide  desirable  securities  when  wanted. 

Some  trust  companies  purchase  real  estate  mortgages  and  issue 
their  bonds  secured  by  a  specific  pledge  of  these  mortgages  as  col- 
lateral. It  is  customary  to  pay  a  lower  rate  of  interest  on  the  bonds 
than  is  received  by  the  company  on  the  mortgages.  The  difference 
between  the  rate  of  interest  paid  and  received,  forms  the  company's 
profit.  In  this  case  the  company  issues  its  own  obligation  and  assumes 
a  direct  liability. 

The  securities  held  for  sale  are  shown  in  one  controlling  account 
in  the  general  ledger,  and  auxiliary  ledger  accounts  are  kept  with  each 
security  and  each  customer.  The  auxiliary  security  ledgers  are  in 
the  same  form  as  those  used  for  the  company's  own  investments. 
Card  indexes  showing  the  securities  on  hand,  and  the  prices  asked 
and  received,  are  alsp  used.  The  market  price  of  the  securities 
offered  for  sale  should  be  closely  followed  in  order  to  prevent  the 
possibility  of  making  sales  either  too  far  below  or  too  far  above  the 
ruling  price.  Lists  of  bond  offerings  are  often  sent  to  customers  at 
stated  intervals  and  may  be  used  as  effective  advertising  matter. 

The  officer  in  charge  of  the  bond  department  should  have  a  good 
knowledge  of  securities,  and  be  prepared  to  assist  investors  in  making 
their  purchases.  A  trust  company  should  always  urge  its  customers 
to  look  to  the  safety  of  their  principal,  even  if  this  advice  occasionally 
deprives  it  of  a  commission. 

TRAVELLERS'  LETTERS  OF  CREDIT 

The  constantly  increasing  stream  of  travel  has  forced  the  trust 
companies  to  make  arrangements  for  supplying  their  depositors 
with  funds  while  away  from  home.  This  is  usually  done  through  the 
purchase  by  the  traveller  of  a  so-called  letter  of  credit.  The  letter 
of  credit  is  a  form  of  circular  letter  addressed  to  the  various  corre- 
spondents of  the  issuing  house,  advising  them  that  the  holder  is  entitled 
to  a  credit  on  their  books  of  the  amount  stated  in  the  letter.  The 
credit  is  good  for  a  limited  period,  and  as  payments  are  made  they 
are  indorsed  on  the  letter  itself.  A  specimen  signature,  either  on  a 
separate  sheet  or  on  the  letter,  serves  as  a  means  of  identification. 

A  letter  of  credit  is  often  drawn  in  favor  of  two  or  more  persons, 
so  that  either  can  use  it  to  procure  funds. 


100  THE  MODERN  TRUST   COMPANY 

The  terms  on  which  letters  of  credit  are  issued  are  various.  A 
cash  payment  can  be  made,  with  the  usual  commission  added, 
which  is  generally  from  one-half  per  cent  to  one  per  cent,  depending 
on  the  amount.  Or  credits  may  be  issued  against  a  satisfactory 
guarantee  of  repayment  as  the  drafts  appear.  Or  a  cash  deposit 
can  be  made  with  the  bankers,  which  is  treated  as  an  ordinary  deposit 
account,  on  which  interest  is  allowed  on  daily  balances,  and  against 
which  the  drafts  are  charged  on  presentation.  Approved  collateral 
can  also  be  deposited  as  a  guarantee  that  the  drafts  will  be  met. 
When  credits  are  issued  against  guarantee,  cash  deposited,  or  satis- 
factory collateral,  the  commission  is  added  to  the  amount  of  each 
draft.  If  issued  in  a  foreign  country,  each  draft  upon  reaching 
the  principal  office  of  the  bankers  abroad  is  usually  converted  into 
dollars  at  the  buying  rate  of  exchange  on  New  York,  to  which  is 
sometimes  added  interest  covering  the  time  elapsing  between  the 
date  of  issue  and  that  of  final  payment. 

As  the  trust  companies  naturally  prefer  to  have  their  customers 
deal  through  them  rather  than  go  directly  to  the  bankers,  it  is  cus- 
tomary for  the  trust  company  to  attend  to  all  the  details  connected 
with  procuring  the  desired  credits,  and  either  to  issue  the  letter  itself 
as  agent  for  a  foreign  banking  house  or  to  procure  it  from  the  bank- 
ing house  on  presentation  of  the  proper  guarantee. 

The  trust  company  takes  from  its  customer  a  guarantee  by  which 
it  is  authorized  to  arrange  for  the  issue  of  the  desired  credit  and  to 
retain  funds  in  the  depositor's  account  sufficient  to  meet  the  total 
amount  of  the  credit,  and  the  depositor  further  agrees  to  accept  as 
vouchers  for  moneys  paid  out  all  drafts  issued  or  paid  by  the  bankers 
under  the  letter  of  credit  or  any  renewal  or  extension.  If  there  is 
not  a  sufficient  amount  in  the  depositor's  account  to  cover  the  entire 
credit,  a  satisfactory  guarantee  is  given  or  collateral  security  is  pledged 
on  the  usual  terms.  The  trust  company  then  issues  its  guarantee,  and 
agrees  to  pay  the  bankers  on  demand  the  amounts  drawn  against 
the  letter  together  with  the  usual  charges.  The  trust  company  on 
issuing  or  procuring  the  credit  has  the  customer  append  a  copy  of 
his  signature  to  it,  or  to  the  proper  document  accompanying  it,  and 
sends  other  specimens  of  the  signature  to  the  bankers. 

A  record  is  kept  of  all  letters  of  credit  issued  or  guaranteed.  It 
gives  the  date  of  issue,  in  whose  favor  drawn,  the  bankers,  the  number 


BANKING  DEPARTMENT  IOI 

of  the  letter,  its  amount  and  time  of  expiration,  the  account  against 
which  the  drafts  are  to  be  charged,  and  the  nature  of  the  security. 
The  date  of  cancellation  of  the  letter  is  also  recorded.  The  necessary 
data  is  given  the  bookkeepers  and  paying  tellers  so  that  sufficient 
funds  may  be  retained  to  meet  the  drafts  as  presented,  or  if  secured 
by  collateral  that  the  drafts  may  be  honored.  In  the  latter  case,  the 
deposit  account  shows  a  debit  balance,  and  interest  is  charged  on 
the  amount  of  the  overdrafts. 

The  depositors'  guarantees  are  filed  in  numerical  order,  the  can- 
celled ones  separately  from  the  rest. 

The  bankers  usually  allow  the  trust  company  a  small  commission 
on  the  amounts  drawn  under  the  letter  of  credit  issued  through  them. 
The  return  is  trifling,  however,  and  the  business  is  transacted  primarily 
for  the  convenience  of  the  customer. 

A  trust  company  doing  a  general  commercial  and  foreign  exchange 
business  issues  its  own  letters  of  credit  and  arranges  for  the  payment 
of  drafts  at  all  important  points.  This,  however,  cannot  prove  profit- 
able unless  a  considerable  volume  of  business  is  transacted. 

Travellers'  checks  are  also  issued  by  the  principal  banking 
houses.  They  are  for  fixed  sums,  usually  £$,  £10,  or  £20,  and  state 
on  the  face  their  value  in  the  currencies  of  the  various  countries  of 
Europe  most  frequently  visited,  so  that  the  holder  can  tell  the  exact 
amount  he  is  entitled  to  receive  without  any  question  being  raised 
as  to  the  rate  of  exchange.  Identification  is  provided  for  by  a  speci- 
men signature,  as  in  the  case  of  letters  of  credit.  These  checks  are 
sold  for  cash  at  their  face  value  and  the  usual  commission. 

Domestic  letters  of  credit  and  travellers'  checks  are  also  issued  for 
use  in  this  country.  They  are  similar  to  the  foreign  letters  and  checks 
except  that  they  are  issued  in  dollars  instead  of  pounds  or  francs. 

FOREIGN  AND   DOMESTIC   EXCHANGE 

A  trust  company  which  aims  to  serve  the  financial  wants  of  its 
customers  in  every  possible  way  is  sometimes  drawn  from  its  purely 
local  transactions  into  others  of  wider  range.  When  customers  call 
for  drafts  payable  on  other  domestic  points,  if  the  company  does  not 
wish  to  send  the  business  elsewhere,  it  must  put  itself  in  a  position 
to  supply  them.  This  necessitates  the  carrying  of  deposit  accounts 


102  THE   MODERN  TRUST  COMPANY 

with  financial  institutions  in  the  principal  centres,  against  which 
the  drafts  are  drawn.  As  New  York  funds  are  most  in  demand, 
the  company  may  content  itself  with  carrying  accounts  in  that  city 
alone,  and  issue  drafts  on  New  York  which  are  readily  negotiable 
in  any  part  of  the  country. 

When  the  trust  company  does  a  commercial  business,  the  merchant 
may  also  invoke  its  services  to  collect  or  discount  bills  drawn  against 
shipments  of  merchandise  and  to  transfer  his  daily  credits. 

Foreign  as  well  as  domestic  business  must  be  provided  for.  With 
the  expansion  of  the  commerce  of  the  United  States  has  come  the 
corresponding  need  of  facilities  for  the  transfer  of  credits  to  all  parts 
of  the  world,  and  many  financial  institutions,  finding  the  profits 
from  such  business  satisfactory,  have  established  foreign  depart- 
ments. 

Foreign  exchange  is  a  system  by  which  debts  contracted  in  one 
country  are  paid  in  another.  The  rate  of  exchange  is  the  value  or 
price  of  the  currency  of  one  nation  calculated  in  that  of  another. 
The  trade  balance  between  two  countries  is  the  difference  between 
exports  and  imports,  but  their  actual  balance  may  be  very  different, 
owing  to  such  other  factors  as  the  expenditures  of  travellers,  purchase 
of  foreign  securities,  and  foreign  loans. 

Foreign  exchange  is  used  in  the  settlement  of  international  trade 
balances,  and  serves  by  the  use  of  credits  to  obviate  the  transporta- 
tion of  currency  in  payment  of  each  separate  transaction.  By  means 
of  foreign  exchange,  balances  are  settled  between  different  countries, 
just  as  a  bank  account  enables  an  individual  by  drawing  and  receiving 
checks  to  effect  the  necessary  transfer  of  balances  without  resorting 
to  the  use  of  currency.  When  gold,  which  is  the  standard  of  value 
for  international  transactions,  is  shipped,  this  is  because  such  demand 
for  exchange  has  arisen  that  the  premium  or  price  asked  is  in  excess 
of  the  cost  of  actually  transferring  the  metal.  The  moment  that  the 
price  falls  below  this  cost,  shipments  of  the  metal  cease. 

A  foreign  exchange  business  necessitates  the  opening  of  credits 
with  banking  houses  in  the  principal  financial  centres  of  the  world, 
or  at  least  in  London,  with  banks  already  having  such  connections. 

Buying  and  selling  drafts  is  the  simplest  form  of  foreign  exchange 
transaction  ;  in  this  business  any  financial  institution  may  engage 
by  simply  opening  accounts  abroad,  selling  drafts  to  its  customers, 


BANKING  DEPARTMENT  IO3 

and,  in  order  to  maintain  the  foreign  balances,  buying  drafts  payable 
abroad  which  it  forwards  for  collection  and  deposit  to  its  credit. 

The  more  intricate  foreign  exchange  transactions  are  largely  in 
the  hands  of  international  banking  houses,  yet  many  trust  companies 
which  do  a  commercial  banking  business  are  establishing  foreign 
departments  both  for  the  convenience  of  their  customers  and  the 
more  profitable  use  of  their  own  funds.  Their  principal  foreign 
business  is  in  the  buying  and  selling  of  exchange  against  merchandise 
and  in  connection  with  trade  operations,  in  the  purchase  and  sale 
of  drafts,  and  the  issuing  of  both  travellers'  and  commercial  letters 
of  credit. 

In  exchange  against  merchandise,  the  process  is  as  follows :  the 
exporter,  immediately  on  shipment  of  his  wares,  in  order  to  reimburse 
himself,  sells  his  draft  drawn  on  the  purchaser  of  the  goods,  with  the 
bills  of  lading  attached,  and  at  once  renounces  title  to  them.  The 
purchaser  of  the  draft  becomes  the  owner,  not  only  of  the  draft  for 
which  the  drawer  is  liable,  but  of  the  merchandise  as  collateral  security. 
The  draft  may  be  forwarded  direct  to  its  destination  for  collection 
in  accordance  with  its  terms,  or  it  may  be  sold  and  a  profit  at  once 
secured. 

Drafts  are  usually  drawn  payable  at  sight  or  at  three,  ten,  thirty, 
sixty,  or  ninety  days  after  acceptance.  The  term  "Thirty  days 
after  sight"  signifies  that  the  draft  is  payable  thirty  days  after  its 
presentation  to  the  drawee  for  his  acceptance,  or  engagement  that 
the  obligation  will  be  honored  by  him  at  maturity.  Such  presenta- 
tion should  be  made  promptly. 

The  successful  conduct  of  a  foreign  exchange  business  requires 
a  knowledge  not  only  of  monetary  but  of  trade  conditions  abroad. 
In  the  purchase  of  a  draft  with  a  bill  of  lading  attached,  the  amount 
of  the  draft  has  to  be  calculated  in  its  equivalent  in  the  foreign  cur- 
rency, and  additional  charges  such  as  insurance,  postage,  interest, 
stamp  tax,  and  commissions  may  have  to  be  computed,  and  great 
care  must  be  taken  to  be  certain  that  all  the  papers  are  in  proper 
form. 

The  transfer  of  credits  from  one  country  to  another  through  a 
third  having  a  different  monetary  standard,  is  called  the  arbitration 
of  exchange.  Thus  in  remitting  funds  from  this  country  to  Paris, 
it  may  be  cheaper  to  remit  by  the  way  of  London  rather  than  to 


104  THE  MODERN  TRUST  COMPANY 

purchase  exchange  on  Paris  direct,  owing  to  the  lower  cost  of  exchange 
on  Paris  in  London.  The  chief  difficulty  often  lies  in  the  intricate 
calculations  by  which  the  small  profit  on  each  transaction  must  be 
determined.  Cambists,  persons  skilled  in  the  exchanges  of  money, 
have  prepared  tables  which  are  generally  used  in  computing  trans- 
actions in  exchange  and  greatly  facilitate  the  handling  of  business 
which  would  require  an  enormous  expenditure  of  time  and  labor  were 
each  calculation  to  be  made  separately. 

Foreign  exchange  is  a  distinct  field  of  banking  operations,  occu- 
pied principally  by  the  banks  and  international  banking  houses. 
Into  it  the  trust  companies  are  gradually  entering,  and  for  that  reason 
it  is  briefly  mentioned  here. 

STOCK  LEDGER  AND  STOCKHOLDERS'   DIVIDENDS 

A  trust  company  which  maintains  a  transfer  department  can 
properly  care  for  its  own  stock  there,  both  in  the  making  of  transfers 
and  the  payment  of  dividends.  Otherwise,  the  banking  department 
is  often  charged  with  this  duty. 

In  the  stock  ledger  the  stockholders'  names  appear  at  the  head 
of  each  account,  exactly  as  the  certificates  are  registered.  Each 
page  has  divisions  for  certificates  cancelled  and  certificates  issued, 
with  a  balance  column  between.  The  subdivisions  on  each  side 
of  the  page  are:  date,  name,  transfer  folio,  certificate  numbers, 
and  shares. 

The  blank  stock  certificates  are  numbered,  and  bound  in  books 
holding  from  one  hundred  to  five  hundred  leaves.  When  cancelled, 
the  certificates  are  usually  pasted  back  on  their  original  stubs. 

Transfers  are  made  according  to  by-law  and  statutory  provisions. 
The  transfer  book  is  arranged  so  that  each  page  will  suffice  for  one 
or  for  several  transactions. 

In  companies  having  a  considerable  number  of  stockholders,  an 
alphabetical  card  index  is  kept,  showing  their  names,  addresses,  the 
number  of  shares  held  by  each,  and  directions  as  to  payment  of 
dividends.  This  index  can  be  either  the  original  permanent  orders 
signed  by  the  stockholders  or  a  transcript. 

Dividends  are  declared  by  the  board  of  directors,  payable  on 
demand  or  at  a  fixed  date,  in  accordance  with  the  requirements  of 


BANKING  DEPARTMENT  105 

the  by-laws.  When  a  stock  is  listed,  the  rules  of  the  local  stock 
exchange  as  to  the  declaration  and  payment  of  dividends  must  be 
observed.  The  usual  method  is  for  the  board  to  declare  by  resolution 
a  dividend  payable  to  stockholders  of  record  on  a  date  named,  at  least 
several  days  later  than  the  meeting,  and  payable  at  a  still  later  time. 
These  facts  are  at  once  made  public  by  advertisement  and  notice 
to  the  stock  exchange,  thus  affording  an  opportunity  for  the  transfer 
of  shares  in  time  to  receive  the  dividend.  Stocks  are  often  held  for 
speculative  purposes  in  bearer  form  indorsed  for  transfer  by  the 
seller,  and  are  not  actually  transferred  until  just  before  a  dividend 
payment. 

It  used  to  be  the  custom  to  close  the  transfer  books  for  some 
time,  and  open  them  after  the  payment  of  the  dividend ;  but  this  prac- 
tice is  being  generally  abandoned  as  it  serves  no  good  purpose,  and 
the  books  are  now  usually  closed  only  over  night. 

A  dividend  list  is  prepared,  giving  the  number  of  each  check, 
name  of  the  stockholder,  number  of  shares  held,  amount  of  dividend, 
to  whom  payable,  and  what  disposition  is  to  be  made  of  the  check. 
This  serves  as  a  stub,  and  loose,  numbered  checks  are  filled  in  from 
the  data  on  the  dividend  list.  The  checks  are,  for  convenience, 
specially  printed  or  engraved.  The  following  is  a  form  very  generally 
used :  — 

DIVIDEND  CHECK 


21 

"o  «  • 

No. 

__IQO 

heck  is  a  suffi 
of  the  divic 
bed  promptly 

THE   MODERN   TRUST 
Pay  to  the  order  of 

COMPANY 

S.S-3 

'•£§2 

Dollars, 

2:'i 

g-Sj? 

being  Dividend  No.  i,  payable  this  date,  on 

Shares  of  the  Stock 

S«~  K 

V  O  O 

J  s-a 

of  this  Company,  standing  in  the  name  of 

IN*8 

J8|J 

$ 

Treasurer. 

H  «£ 

When  dividend  checks  are  mailed  a  printed  notice  giving  further 
information  is  often  sent  with  them. 

The  old  method  of  paying  dividends  and  interest  over  the  counter, 


106  THE  MODERN   TRUST  COMPANY 

and  taking  a  receipt,  has  been  almost  entirely  superseded  by  the 
acceptance  of  permanent  mailing  orders.  Whatever  advantage 
may  have  accrued  from  the  stockholders  visiting  the  company's 
building  at  stated  intervals,  did  not  compensate  for  the  loss  of  time 
and  interruption  to  regular  business. 


EXPENSE  ACCOUNT 

It  is  important  that  the  authority  for  all  expenditures  should 
originate  from  a  single  source.  One  of  the  general  officers  should 
be  responsible  for  making  contracts  and  giving  orders. 

A  card  index  record  is  kept  of  all  outstanding  contracts,  such  as 
those  for  advertising,  coal,  and  telephones.  For  separate  purchases 
order  books  are  used,  and  all  orders  are  given  in  writing  on  a  regular 
form  with  the  words,  "Please  send  us  with  bill,  and  charge  to  our 


THE   MODERN   TRUST   COMPANY 

To Date __. 

Please  send  us  the  following  check  books  and  charge  to  our  account :  — 

Number  of  books Checks  to  book Checks  to  page 

Paper Style Binding 

Numbered,  commence 

Print  on  end  of  check . 

Print  on  bottom  of  check 

Cost  of  Printing 

Cost  of  Binding 

Cost  of  Numbering 

Total (Signed) _ 

Treasurer. 


account,"  followed  by  an  itemized  list  of  the  goods  required.  The 
order  should  also  contain  the  statement  that  bills  must  in  all  cases 
be  sent  promptly  and  be  distinctly  marked  with  the  number  of 
the  order.  Either  a  stub  or  carbon  copy  of  the  order  is  kept.  A 
separate  order  book  can  be  used  for  each  firm  from  which  goods  are 
regularly  purchased,  and  special  order  forms  are  often  a  great  con- 
venience. The  above  form,  used  in  ordering  special  check  books 


BANKING  DEPARTMENT  IO/ 

printed  for  depositors,  prevents  omissions  and  errors,  and  simplifies 
an  otherwise  troublesome  detail.  A  supply  of  unbound  checks  is 
kept  on  hand,  and  the  prices  for  printing,  binding,  and  numbering 
are  fixed  in  advance  by  contract. 

When  goods  are  delivered,  they  are  compared  with  the  accompany- 
ing bill  and  the  original  order.  If  correct,  the  bill  is  marked  by  the 
stock  clerk,  and  the  price  and  date  when  received  are  noted  in  the 
order  book.  The  bill  is  then  entered  and  given  a  consecutive  number 
in  the  record  of  expenses  book,  which  corresponds  to  what  is  com- 
monly known  as  the  voucher  record.  When  goods  are  being  con- 
stantly ordered  and  received  from  the  same  firm,  instead  of  entering 
each  item  separately,  a  statement  of  the  total  month's  purchases  is 
verified  by  comparison  with  the  order  book,  and  is  then  entered  as 
a  single  item  in  the  record  of  expenses.  The  unchecked  items  in 
the  order  book  represent  the  goods  not  yet  received.  For  conven- 
ience in  finding  these  open -items,  their  numbers  are  listed  on  the  back 
of  the  last  stub  or  page  used  during  the  month. 

If  a  bill  is  to  be  paid  at  once  to  bearer,  the  proper  entries  are 
made  in  the  record  of  expenses  book,  the  bill  is  numbered  and 
initialled  by  the  disbursing  officer,  and  is  then  paid  by  the  teller,  who 
takes  the  receipted  bill  itself  as  his  voucher.  If  payment  is  to  be 
made  when  no  bill  has  been  presented,  an  ordinary  charge  slip  may  be 
made  out.  The  regular  bills  should  be  paid  by  check  on  fixed  dates,  at 
least  twice  a  month.  It  is  convenient  to  have  special  checks  printed 
with  the  words  "  Charge  Expenses  Payable."  Both  the  bill  and 
check  are  given  the  same  number,  and  after  payment  are  filed 
together  in  numerical  order.  Instead  of  using  the  original  bills,  the 
data  may  be  copied  on  special  voucher  forms.  The  vouchers  are 
uniform  and  easier  of  reference,  but  involve  more  labor  than  the 
original  bills. 

An  effort  should  be  made  to  get,  on  the  last  day  of  each  month, 
statements  of  all  purchases  made  within  the  month,  so  that  the  actual 
outstanding  liability  can  be  shown  in  the  monthly  balance  sheets. 
A  careful  record  of  expenses  is  the  first  step  toward  a  thorough 
analysis  of  the  expense  account.  In  commercial  business  and  in 
manufactures,  cost  accounts  are  treated  on  an  almost  scientific  basis. 
Maintenance  and  depreciation  of  plant,  general  expenses  of  manage- 
ment, as  well  as  materials  and  labor,  must  be  considered  in  estimating 


108  THE   MODERN  TRUST  COMPANY 

the  cost  of  production.  In  financial  business  the  problem  is  simpler 
though  no  less  important,  yet  few  trust  companies  analyze  their  ex- 
penses at  all,  or  if  they  do,  they  merely  divide  them  into  such  general 
items  as  salaries,  printing,  stationery,  postage,  coal,  etc.,  which  afford 
no  basis  for  determining  the  cost  of  the  various  parts  of  the  company's 
business. 

The  fundamental  division  in  an  analysis  of  expenses  should  be 
into  general  costs  affecting  the  entire  business,  and  the  special  costs 
of  each  department.  If  so  desired,  the  general  items  can  be  pro- 
rated among  the  different  departments.  For  the  ordinary  purposes 
of  a  trust  company  this  is,  however,  not  necessary. 

The  record  of  expenses  contains  the  itemized  list  of  charges 
properly  distributed.  Two  pages  are  required  for  the  form.  Com- 
mencing on  the  left-hand  side  are  columns  for  the  voucher  number, 
date,  name,  total  amount,  and  date  of  payment.  The  total  of  the 
unpaid  items  agrees  with  the  balance  in  "  expenses  payable  "  in  the 
general  ledger.  Then  follows  the  distribution  in  a  series  of  columns 
for  the  different  kinds  of  expense,  which  settle  with  the  total  column. 
The  following  arrangement  has  been  found  a  satisfactory  one,  and 
admits  of  modification  to  suit  the  details  of  each  business :  — 

General  Officers.  —  This  item  includes  all  officers  whose  services 
are  not  devoted  to  a  single  department.  Not  only  salaries,  but  all 
expenses  incurred  on  their  account  are  included. 

Directors.  —  Fees  paid  directors  for  board  and  committee  meet- 
ings, examinations  of  assets,  and  expenses  on  their  account  are  re- 
corded under  this  head. 

Legal  Expenses.  —  Covers  general  legal  expenses  only,  such  as 
retainers  paid  counsel,  and  costs  not  chargeable  to  a  separate  depart- 
ment. 

Telephone.  —  Large  companies  have  private  branch  exchanges 
and  employ  one  or  more  telephone  operators.  Rentals,  calls  not 
chargeable  to  a  particular  department,  and  wages  are  included. 

Advertising.  — Newspaper  and  all  other  forms  of  advertising  are 
shown  here.  • 

Messengers  and  Watchmen.  —  Wages,  uniforms,  and  all  other 
charges  are  included. 

Lighting  and  Heating.  —  Covers  wages  of  engineers,  electricians, 
and  firemen,  coal,  gas,  electricity,  etc. 


BANKING  DEPARTMENT  109 

Maintenance  of  Building.  —  All  repairs  to  the  building  are  shown 
under  this  item. 

Maintenance  o]  Equipment.  —  Repairs  and  renewals  of  furniture 
and  fixtures  are  included. 

Then  follow  the  various  departments,  according  to  the  organi- 
zation and  business  of  the  company :  — 

Banking  Department.  —  Salaries  of  officers  whose  whole  time  is 
devoted  to  the  department,  wages  of  clerks,  cost  of  printing,  station- 
ery, postage,  and  all  other  items  chargeable  to  the  cost  of  maintaining 
the  department  are  included. 

Savings  Fund  Department.  —  When  managed  as  a  separate  de- 
partment, this  item  is  shown.  It  is  often  included  in  the  banking 
department. 

Trust  Department.  —  When  all  trust  business  is  transacted  in  the 
same  department,  one  item  is  shown.  When  separate  departments 
for  corporate  trust  and 'for  individual  trust  business  are  maintained, 
they  are  shown  separately  and  may  be  further  subdivided. 

Safe  Deposit  Department.  —  This  item  is  treated  in  the  same  way 
as  the  other  departments. 

Restaurant.  —  If  a  luncheon  is  provided  for  the  officers  and 
clerks,  the  total  cost  should  be  shown  and  itemized  as  to  wages,  gro- 
ceries and  provisions,  meat,  butter  and  eggs,  fruit  and  vegetables, 
ice,  milk,  and  maintenance  of  equipment.  Where  an  allowance  is 
made  for  meals  when  clerks  are  obliged  to  work  overtime,  another 
column,  "  Clerks'  Suppers,"  should  be  shown. 

Miscellaneous  Expenses.  —  All  items  which  cannot  be  otherwise 
distributed  are  included  under  this  caption.  This  column  should 
be  used  only  as  a  last  resort. 

In  order  to  include  expenses  in  the  daily  balance  sheet,  the  fol- 
lowing is  the  mode  of  procedure :  — 

Each  morning  the  total  sum  shown  by  the  record  of  expenses  for 
the  current  month  is  added  to  the  amount  on  the  credit  side  of  the 
expenses  payable  account  in  the  general  ledger  and  the  amount  shown 
on  the  debit  side  of  the  expenses  payable  is  deducted.  The  balance 
then  represents  the  amount  of  outstanding  liabilities  to  be  entered 
on  the  comparative  daily  balance  sheet,  as  expenses  payable.  The 
total  for  the  current  month  shown  in  the  record  of  expenses,  plus  the 
balance  of  "expenses"  in  the  general  ledger,  is  entered  as  expenses 


1 10  THE  MODERN  TRUST  COMPANY 

on  the  comparative  daily  balance  sheet  and  represents  all  liabilities 
incurred  whether  paid  or  unpaid.  This  is  a  short  method  equiva- 
lent to  a  daily  entry  through  the  journal. 

At  the  end  of  the  month,  the  total  shown  by  the  record  of  expenses 
is  brought  into  the  general  ledger  by  a  journal  entry  charging  ex- 
penses and  crediting  expenses  payable.1 

At  the  back  of  the  record  of  expenses  a  summary  is  kept,  arranged 
as  to  months  and  years.  Here  one  can  see  at  a  glance  how  the  ex- 
penses of  one  month  or  year  compare  with  another,  and  any  discrepan- 
cies or  large  changes  in  totals  can  easily  be  detected  and  the  causes 
investigated. 

Supplementing  the  record  of  expenses  is  a  card  index  giving  the 
names  and  addresses  of  all  firms  appearing  in  the  book.  Following 
the  name  and  address  are  the  numbers  of  the  firm's  vouchers, 
arranged  chronologically.  This  card  index  obviates  the  necessity 
of  keeping  a  purchase  ledger  in  which  the  account  with  each  firm  is 
shown  in  detail,  and  enables  one  to  locate  quickly  the  purchases  from 
a  given  firm  in  the  record  of  expenses  or  in  the  bills  themselves. 

PETTY   CASH   RECEIPTS 

In  large  companies,  a  petty  cash  receipts  book  should  be  kept  in 
which  all  petty  items  forming  credits  to  the  expense  and  other  general 
ledger  accounts  are  entered.  The  book  should  be  closed  at  regular 
intervals,  and  the  cash  on  hand  be  turned  over  to  the  receiving  teller 
with  a  slip  showing  the  proper  general  ledger  accounts  to  be  credited. 

PETTY  CASH   PAYMENTS 

There  should  be  only  one  petty  cash  drawer.  A  fixed  sum  should 
be  held  as  a  permanent  fund  to  meet  petty  expenses.  This  amount 
is  carried  as  an  item  in  the  paying  teller's  settlement.  Payments  from 
this  fund  are  made  only  on  bills  or  slips  approved  by  the  proper  offi- 
cer. These  vouchers  are  examined  at  fixed  periods  and,  if  correct,  the 
expense  account  is  charged  with  the  total,  and  the  fund  replenished  to  its 
original  amount.  A  record  of  these  payments  is  kept  in  an  ordinary 
cash  book.  This  plan  is  much  to  be  preferred  to  the  common  prac- 
tice of  having  the  paying  teller  pay  these  items,  carrying  them  as  cash, 
and  charging  them  to  expenses  at  the  end  of  the  month. 

1  See  under  General  Ledger,  p.  238. 


BANKING  DEPARTMENT 


PAYMENT   OF  SALARIES 

In  trust  companies,  salaries  are  generally  paid  either  once  or  twice 
each  month.  Monthly  payments  reduce  the  clerical  labor  to  a  mini- 
mum, and  are  customary  in  financial  institutions  where  the  employees 
are  usually  in  a  position  to  make  their  domestic  arrangements  conform 
to  a  monthly  pay-day. 

If  possible,  salaries  should  be  paid  by  check,  as  this  obviates  both 
putting  up  the  pay-roll  and  taking  separate  receipts.  When  a  check 
is  used,  the  employee's  indorsement  is  all  that  is  required.  A  list  is 
prepared,  showing  the  name  of  each  employee  and  the  number  and 
amount  of  each  check.  Loose  checks  are  written  up  from  this 
list,  which  serves  in  place  of  a  "stub"  and  is  filed  to  show  the  details 
of  the  salary  item  in  the  expense  account,  so  that  it  may  be  divided 
according  to  the  charge  against  each  department.  Where  salaries 
are  fixed  by  definite  rules,  according  to  the  position  held,  length  of 
service,  etc.,  there  is  no  motive  for  secrecy ;  but  where  there  is  no  uni- 
form scale,  the  amount  paid  each  employee  is  often  considered  an  ab- 
solutely confidential  matter,  and  the  disbursing  officer  is  obliged  to  use 
cash.  When  cash  is  used  in  making  salary  payments,  it  is  well  to 
prepare  a  list  giving  the  name  of  each  employee,  followed  by  columns 
showing  the  number  of  each  denomination  of  note  and  coin  required, 
and  the  total  of  each  payment.  The  total  number  of  pieces  of  each 
denomination  settle  with  the  footing  of  the  total  column  and  prove 
the  correctness  of  the  pay-roll.  In  putting  up  the  money,  the  largest 
possible  denominations  are  used  to  make  each  amount.  The 
envelope  should  be  large  enough  to  hold  notes  without  folding,  and 
should  be  numbered  to  correspond  with  the  employee's  sheet  in  the 
salary  book.  This  salary  book  should  be  composed  of  loose  leaves 
with  an  alphabetical  index  on  the  inside  front  cover.  Each  page 
is  headed  with  the  name  of  the  employee,  the  number  of  the  sheet, 
and  the  following  printed  statement :  — 

"  I  acknowledge  the  receipt  of  the  sums  written  opposite  my  several  signa- 
tures below,  for  my  salary  in  full  to  the  dates  stated." 

The  remainder  of  the  sheet  is  ruled  in  perpendicular  columns  for  date 
of  payment,  amount,  to  what  date,  and  the  employee's  signature.    The 


112  THE  MODERN   TRUST   COMPANY 

amount  of  each  payment  should  be  shown  in  figures.  Sheets  no 
longer  in  use  are  removed  from  the  binder  and  filed  alphabetically. 
When  the  salary  covers  the  calendar  month,  it  is  wise  to  "pay  off" 
a  day  or  two  early,  so  as  to  avoid  the  rush  of  the  last  and  first  days  of 
the  month.  Sometimes  the  salary  period  is  to  a  fixed  date  during 
the  month,  such  as  the  fifteenth  or  twentieth. 

The  salary  should  be  put  up  the  day  before  it  is  paid,  and  the  pay- 
ments should  be  made  at  the  opening  hour,  so  as  to  interfere  with 
business  as  little  as  possible.  When  the  salary  is  paid  in  cash,  the 
employees  should  go  to  the  disbursing  officer's  counter  to  receipt  for 
and  receive  their  envelopes.  When  payment  is  made  by  check,  the 
disbursing  officer  can  save  time  by  visiting  each  department  in  turn, 
instead  of  having  the  employees  come  to  him. 


CHAPTER  VI 

CORPORATE   TRUST  DEPARTMENT 

THE  same  charters  under  which  trust  companies  have  become 
trustees  and  agents  for  individuals  have  made  it  possible  for  them 
to  act  in  like  capacities  for  corporate  clients.  As  their  corporate 
business  has  grown,  they  have  increasingly  found  the  necessity  of 
organizing  it  in  a  separate  department.  The  distinction  is  based  more 
on  practical  convenience  than  on  any  real  difference  of  function.  In 
a  small  company  both  kinds  of  trusts  may  perfectly  well  be  grouped 
together,  provided  separate  records  are  kept.  In  a  company  doing 
a  large  corporate  business,  the  corporate  trust  department  may  itself 
have  to  be  subdivided  according  to  the  various  duties  which  the  com- 
pany assumes. 

TRUSTEE 

A  generation  ago  it  was  customary  for  a  railroad  to  name  one  or 
more  individuals  as  trustees  of  the  mortgages  executed  to  secure  bond 
issues.  The  development  of  trust  companies  and  their  manifest 
advantages  over  individuals  in  such  a  capacity  has  resulted  in  their 
absorbing  almost  all  this  business.  Trust  companies  are  now  gen- 
erally appointed  as  trustees  in  corporation  mortgages,  and  are  also 
often  named  to  succeed  individuals  who  have  died  or  resigned.  The 
appointment  is  one  of  the  most  important  and  far  reaching  which  the 
trust  company  can  accept.  Its  name  and  reputation  serve  as  an 
assurance  that  the  transaction  is  a  regular  one,  entered  into  in  good 
faith,  and  that  the  necessary  legal  and  other  formalities  have  been 
complied  with.  Although  the  modern  corporation  mortgage  is  usu- 
ally explicit  in  its  terms  to  the  effect  that  the  trustee  in  no  way  guar- 
antees the  value  of  the  security  and  assumes  no  liability  except  for  its 
own  negligence,  yet  the  intimate  connection  between  the  trustee  and 
the  borrowing  corporation  in  the  minds  of  investors  makes  it  necessary 
that  care  be  taken  not  to  assume  trusteeships  which  may  lead  to  a 
wrong  use  of  the  name  and  credit  of  the  trust  company. 
i  113 


114  THE   MODERN  TRUST   COMPANY 

As  trustee  under  mortgages  securing  bond  issues,  the  title  to  the 
mortgaged  property  is  vested  in  the  trust  company  for  the  benefit  of 
the  security  holders.  The  corporation  owning  the  mortgaged  prop- 
erty retains  physical  possession  of  it  so  long  as  the  terms  of  the  obli- 
gation are  complied  with,  except  in  the  case  of  securities  pledged, 
which  are  usually  lodged  with  the  trustee.  In  case  of  default,  how- 
ever, it  devolves  upon  the  trustee  to  protect  the  interests  of  the 
bondholders,  and  this  may  necessitate  the  foreclosure  of  the  mortgage 
and  sale  of  the  property.1 

Before  accepting  a  corporation  mortgage  trust,  all  reasonable  care 
should  be  taken  to  ascertain  the  correctness  of  statements  and  the 
legality  of  the  mortgage,  even  though  the  liability  of  the  trustee  is 
restricted  to  gross  negligence  or  wilful  default.  An  opinion  should 
be  required  from  the  counsel  of  the  corporation  making  the  mort- 
gage that  the  document  is  in  proper  form,  that  its  purpose  is  lawful 
and  in  accordance  with  the  statutes  of  the  state  in  which  the  premises 
to  be  mortgaged  are  situated.  A  draft  of  the  proposed  mortgage 
and  bonds  should  be  submitted  to  the  trust  company  for  inspection 
and  be  passed  on  by  its  own  counsel.  As  the  exact  provisions  of 
each  mortgage  differ,  it  is  a  safe  rule  never  to  accept  a  trusteeship 
until  the  papers  have  been  approved  by  counsel. 

The  mortgage  should  contain  clauses  clearly  defining  the  rights 
and  duties  of  the  trustee  and  limiting  its  liability.  Provision  should 
also  be  required  for  indemnification  against  expense  in  taking  action 
to  enforce  the  rights  of  the  bondholders,  and  limiting  the  right  of  such 
action  to  the  trustee  except  in  case  of  the  trustee's  refusal  to  act.2 

The  mortgage  should  contain  a  clear  and  concise  description  of 
the  mortgaged  property,  and  if  it  is  stated  that  it  is  a  first  lien 
against  the  property,  the  fact  should  be  verified.  After  the  prelimi- 
nary arrangements  have  been  completed,  including  an  agreement  as 
to  compensation,  the  mortgage  is  executed  and  acknowledgment  of 
the  acceptance  of  the  trust  is  made  by  the  trustee.  The  mortgage 
is  executed  in  duplicate,  and  when  it  is  necessary  to  record  the  docu- 

1  For  a  full  and  interesting  description  of  railway  bonds,  see  "  Corporation  Finance," 
by  Thomas  L.  Greene,  p.  33  et  seq. 

2  See  "  Essentials  required  by  Trust  Companies  to  be  put  in  Mortgages  and  Other 
Papers,"   Andrew  Squires.    Proceedings  Trust  Company   Section,  American   Bankers' 
Association,  1900. 


CORPORATE  TRUST  DEPARTMENT  115 

ment  in  several  states  more  copies  may  be  required.    A  final  opin- 
ion of  counsel  may  be  obtained,  after  the  mortgage  is  recorded. 

It  is  usual  to  have  bonds  engraved  by  responsible  companies, 
from  specially  prepared  plates.  Precautions  are  taken  to  prevent 
any  impressions  being  lost  or  stolen,  and  the  engravers  may  even  be 
required  to  give  security  against  loss  resulting  from  negligence  on  their 
part.  The  bonds  are  sealed  with  the  corporate  seal,  attested  by  the 
officers  of  the  issuing  company,  and  are  then  sent  to  the  trustee  who 
certifies  and  delivers  them  as  provided  in  the  mortgage.  Before 
being  certified,  each  bond  should  be  examined  to  see  whether  it  is 
in  proper  form.  The  exact  phraseology  used  in  certifying  bonds 
varies,  the  intent  being  simply  to  identify  the  security.  The  following 
is  one  of  the  more  usual  forms :  — 

"  It  is  hereby  certified  that  this  is  one  of  the  bonds  described  in  the  mort- 
gage or  deed  of  trust  within  mentioned." 

To  this  is  added  the  name  of  the  trust  company,  trustee,  and  the 
signature  of  the  officer  who  certifies  the  bond. 

The  mortgage  provisions  for  delivery  of  the  bonds  by  the  trustee 
vary  widely.  It  may  be  stipulated  that  the  entire  issue  is  to  be  cer- 
tified and  delivered  as  soon  as  the  mortgage  is  recorded;  or  that  a 
fixed  amount  be  issued,  depending  on  the  completion  of  work  on  the 
mortgaged  property,  as  for  instance,  when  a  railroad  mortgage  speci- 
fies that  a  definite  number  of  bonds  may  be  issued  for  each  mile  of 
roadbed  constructed.  Part  of  an  issue  may  be  reserved  to  retire 
underlying  bonds  as  they  mature,  and  provisions  may  be  made  to 
issue  a  fixed  amount  each  year.  When  a  loan  is  made  to  provide 
funds  for  the  construction  of  a  railroad  or  other  enterprise,  the  trustee 
is  sometimes  required  by  the  terms  of  the  mortgage  immediately  to 
certify  and  deliver  all  the  bonds,  even  though  the  work  has  not  begun. 
Such  a  course  may  open  the  way  to  gross  irregularities  and  misap- 
propriation of  funds.  It  is  far  safer  to  require  that  bonds  shall  be 
delivered  only  as  the  work  progresses.  A  mortgage  may  provide  that 
all  subsequently  acquired  property  shall  be  subject  to  its  lien,  that 
properties  may  be  sold  and  released,  and  that  other  properties  may 
be  substituted  in  their  place.  When  properties  are  released,  the 
trustee  may  join  in  the  conveyance.  Many  mortgages  provide  that 
the  issue  may  be  redeemed  at  a  premium  after  a  fixed  date,  either  at 


Il6  THE  MODERN  TRUST  COMPANY 

the  option  of  the  company  issuing  the  bond,  or  by  the  operation  of  a 
sinking  fund. 

If  the  mortgage  provides  for  a  sinking  fund  which  will  secure  the 
gradual  retirement  of  the  bonds  or  their  payment  at  maturity,  it  is 
incumbent  on  the  trustee  to  see  that  such  sinking  fund  provisions  are 
complied  with.  A  frequent  provision  is  that  a  certain  number  of 
bonds  may  or  must  annually  be  retired,  either  at  par  or  at  a  premium. 
In  accordance  with  the  terms  of  the  mortgage,  the  numbers  of  the 
bonds  to  be  called  for  payment  are  drawn  by  lot,  and  public  notice 
of  their  redemption  is  given.  When  the  issue  cannot  be  retired  before 
maturity,  the  sinking  fund  may  be  used  in  buying  bonds  of  the  issue 
or  may  be  invested  in  other  securities. 

In  the  case  of  "collateral  trusts,"  the  security  usually  consists  of 
the  stock  and  bonds  of  subsidiary  companies.  The  trust  may  also 
include  a  general  lien,  subject  to  all  prior  obligations,  on  the  real 
estate  and  other  property  of  the  borrowing  company.  The  securities 
are  deposited  with  the  trustee.  They  are  held  either  with  powers  of 
attorney  attached  so  that  they  can  be  transferred  if  necessary,  or  they 
are  registered  in  the  name  of  the  trustee.  If  substitution  of  col- 
laterals is  permitted  by  the  terms  of  the  mortgage,  the  trustee  should 
be  satisfied  that  the  new  securities  are  fully  equal  in  value  to  those 
withdrawn,  and  in  cases  of  doubt  the  trustee  may  require  not  only 
the  opinion  of  counsel,  but  an  order  of  court. 

"Car  trust"  and  "coal  trust"  agreements  are  other  forms  of  col- 
lateral trust.  Under  the  former,  the  title  to  the  cars  vests  in  the 
trustee,  from  whom  they  are  leased  by  the  railroad  company.  The 
trustee  issues  the  bonds  or  certificates  as  the  cars  are  delivered  and 
paid  for.  The  rental  received  by  the  trustee  is  sufficient  for  interest 
charges  and  the  retirement  of  a  certain  number  of  the  bonds  each  year. 
In  this  way  depreciation  of  the  value  of  the  collateral  is  provided  for, 
and  the  issue  is  entirely  paid  off  during  the  life  of  the  cars.  Coal 
trust  agreements  are  designed  to  enable  the  owners  of  the  coal  to 
obtain  advances  by  issuing  bonds  or  certificates  before  sales  have 
been  effected.  In  such  cases  the  coal  accounts  are  kept  by  the  trustee ; 
as  selling  agent. 

Collateral  trust  obligations  may  be  issued  by  the  borrowing  com- 
pany and  certified  by  the  trustee,  or  they  may  be  issued  by  the  trustee 
itself  in  accordance  with  the  provisions  of  the  trust  agreement. 


CORPORATE  TRUST  DEPARTMENT          117 

If  the  borrowing  corporation  complies  with  the  terms  of  the  mort- 
gage or  deed  of  trust,  the  duties  of  the  trustee  may  be  almost  nominal. 
At  maturity,  on  the  payment  of  principal  and  interest,  the  mortgage 
is  satisfied  of  record  by  the  trustee  and  the  bonds  are  cancelled. 
After  payment  and  cancellation  the  bonds  may  be  burned  in  the 
presence  of  the  trustee,  and  a  cremation  certificate  executed  and 
acknowledged. 

A  clause  is  sometimes  inserted  in  corporation  mortgages  providing 
for  their  satisfaction  by  the  trustee  and  the  release  of  the  mortgaged 
property,  before  all  the  bonds  have  been  presented  for  payment. 
In  such  cases,  funds  sufficient  to  meet  the  outstanding  bonds  are 
deposited  with  the  trustee. 

For  the  general  record  of  corporate  trusts,  a  loose-leaf  book 
can  be  used  to  advantage.  The  special  records  of  corporation 
mortgages  or  trust  deeds,  to  be  inserted  in  this,  comprise  three  sets 
of  sheets :  for  an  abstract  of  the  document ;  a  record  of  bonds  received, 
certified,  and  delivered ;  and  of  bonds  paid,  cancelled,  and  cremated  or 
returned. 

Sheet  A.  —  Abstract.  At  the  top  of  the  page  appear  the  title  of 
the  account  and  trust  number.  As  an  aid  in  preparing  the  abstract, 
it  is  well  to  print  the  principal  subjects  usually  appearing  in  corpora- 
tion mortgages.  The  following  list  may  be  extended  or  altered  to 
meet  varying  requirements,  enough  space  being  left  to  note  briefly 
each  item :  — 

Mortgage  or  deed  of  trust  dated  Recorded 

Lien, 

Amount, 

Interest  rate, 

Interest  due, 

Interest  payable  at, 

Bonds  due, 

Bonds  payable  in  gold  or  coin, 

Bonds,  coupon  or  registered, 

Bonds,  provision  for  exchange  from  one  class  into  the  other, 

Bonds,  denominations  and  numbers  of, 

Bonds  to  be  issued,  how,  when, 

Bonds  issued,  for  what  purpose, 

Bonds  to  be  drawn  or  purchased,  how,  when, 

Description  of  mortgaged  property, 

Sinking  fund,  provisions  of, 

Statements  to  be  furnished  trustee, 


n8 


CORPORATE  TRUST  DEPARTMENT  1 19 

Releases,  power  of  making, 

Default, 

Charges  for  accepting  trust, 

Charges  for  certifying  bonds, 

Charges  for  paying  interest, 

Charges  for  other  services. 

The  back  of  the  sheet  is  headed  "Other  Provisions  of  the  Mortgage 
or  Deed  of  Trust,"  and  is  used  when  the  printed  form  of  abstract  is 
un suited  to  any  particular  document  or  when  the  space  provided  is 
insufficient.  If  this  page  is  not  enough,  additional  sheets  are  in- 
serted as  required.  A  very  brief  abstract  of  the  contents  of  each  arti- 
cle of  the  mortgage,  arranged  by  number  in  the  same  order  in  which 
they  appear  in  the  original  document,  is  also  helpful.  Following  the 
abstract,  brief  entries  can  be  made,  in  chronological  order,  of  any 
important  transactions  which  have  a  bearing  on  the  case. 

Sheet  B.  —  Record  of  bonds  received,  certified,  and  delivered. 
The  trust  number  and  title  of  the  account  are  shown  at  the  top.  The 
upper  third  of  the  page  is  devoted  to  bonds  received  and  bonds  cer- 
tified. At  the  left-hand  side  are  columns  for  the  date,  bond  numbers, 
and  amount  of  bonds  received.  The  bonds  certified  section  to  the 
right  has  columns  for  date,  certified  by,  bond  numbers,  and  amount, 
the  series  being  repeated.  The  remaining  two-thirds  of  the  page  is 
for  the  record  of  bonds  delivered.  This  section  occupies  the  entire 
width  of  the  sheet  and  contains  columns  for  date,  whose  order,  de- 
livered to,  coupon,  bond  numbers,  and  amount.  By  the  omission  of 
the  "delivered  to"  column  and  the  substitution  of  one  headed  "re- 
ceived by,"  following  the  amount  column,  the  receipts  for  bonds 
delivered  can  be  taken  on  the  same  sheet.  The  difference  between 
the  bonds  received  and  bonds  certified  shows  the  bonds  on  hand  and 
uncertified.  The  number  of  bonds  certified  less  the  bonds  delivered 
gives  the  balance  of  certified  bonds  on  hand.  The  form  is  duplicated 
on  the  back  of  the  sheet,  and  in  large  bond  issues  several  leaves 
may  be  needed  for  the  same  security. 

Sheet  C.  —  Record  of  bonds  paid,  cancelled,  and  cremated  or 
returned.  The  record  of  securities  retired  is  kept  on  this  sheet  and 
shows  the  various  steps  in  the  process,  as  the  form  just  described  does 
in  the  matter  of  their  issue. 

The  upper  two-thirds  of  the  page  is  devoted  to  bonds  paid  and 
bonds  cancelled.  The  bonds  paid  section  contains  columns  for  date, 


121 


122  THE  MODERN   TRUST   COMPANY 

numbers,  and  amount,  the  series  being  repeated.  To  the  right  of  this 
section  is  that  for  bonds  cancelled,  containing  columns  headed  date, 
cancelled  by,  numbers,  and  amount.  The  remaining  section,  occu- 
pying the  lower  third  of  the  page,  has  columns  headed  date,  whose 
order,  coupon,  bond  numbers,  amount,  how  disposed  of,  and  a  sig- 
nature column  for  receipts  in  case  of  return  of  the  cancelled  bonds, 
or,  in  case  of  cremation,  for  the  signature  of  the  officer  attesting  this 
fact. 

When  an  account  is  closed,  all  its  sheets  are  put  in  a  transfer 
binder.  Both  open  and  closed  accounts  are  kept  in  the  order  of  their 
trust  numbers. 

A  special  record  of  the  issue  of  coupon  and  registered  bonds  is 
kept  when  the  two  classes  are  interchangeable  at  the  pleasure  of  the 
security  holder.  The  rules  of  the  New  York  Stock  Exchange  re- 
quire that  when  such  exchange  is  made,  the  numbers  of  the  original 
bonds  must  appear  on  the  securities  issued  in  lieu  of  them. 

The  books  just  described  relate  to  the  documents  and  history  of 
each  trust,  and  do  not  provide  records  of  cash  transactions.  Receipts 
and  payments  of  cash  enter  into  most,  if  not  all,  corporate  trusts, 
but  as  these  closely  correspond  to  the  transactions  involved  in  indi- 
vidual trusts,  the  necessary  forms  and  operations  are  described  in 
later  chapters.1 

FISCAL  AGENT 

As  fiscal  agent  the  trust  company  takes  such  general  or  special 
charge  of  the  finances  of  its  corporation  client  as  the  agreement  in 
each  case  provides.  It  may  virtually  assume  the  r61e  of  treasurer, 
making  all  collections  and  disbursements,  or  it  may  merely  receive 
securities  for  safe-keeping,  or  make  investments  or  collect  income. 
It  may  act  as  fiscal  agent  for  the  payment  of  coupons,  interest,  divi- 
dends, and  principal  moneys,  under  the  terms  of  a  mortgage,  or 
independently  of  any  trusteeship.  In  both  cases  the  procedure  is 
identical,  but  in  the  former  the  authority  is  found  in  the  mortgage  or 
trust  deed;  in  the  latter,  an  agreement  is  entered  into,  defining  the 
duties  and  liabilities  of  the  fiscal  agent  and  the  corporation  for 
which  it  acts.  An  abstract  sheet  in  the  general  record  of  corporate 
trusts  should  give  the  details  of  the  appointment.  For  the  payment 

1  See  p.  184. 


CORPORATE  TRUST  DEPARTMENT  123 

of  all  coupons,  bonds,  interest,  and  dividends,  payable  at  the  office  of 
the  trust  company,  a  special  window  may  be  provided  in  the  corpo- 
rate trust  department. 

All  moneys  received  for  disbursement  by  the  fiscal  agent,  both 
income  and  principal,  are  entered  in  a  scratcher  and  are  passed  over 
to  the  trust  department  receiving  teller  for  deposit  in  bank. 

Coupons  are  presented  for  payment  in  envelopes  specifying  the 
title  of  the  security,  number  and  amount  of  the  coupons,  and  the  name 
of  the  institution  or  individual  presenting  them.  Payments  are  made, 
when  possible,  by  check.  On  the  stub  of  the  check  book  the  name 
of  the  payee  and  the  title  and  total  amount  of  each  sort  of  coupon  paid 
is  shown.  To  provide  for  cash  payments,  a  petty  cash  account  is 
opened  in  the  corporate  trust  ledger,  and  a  check  is  drawn  for  a  fixed 
amount,  sufficient  for  ordinary  needs,  to  be  kept  in  the  cash  drawer. 
A  " petty  cash"  book  is  used  in  which  the  payments  are  itemized  as 
they  are  made.  The  'amount  of  money  and  paid  coupons  on  hand, 
at  all  times  equal  the  balance  of  the  account  in  the  corporate  trust 
ledger.  At  the  close  of  each  day  or  when  the  money  is  exhausted,  a 
check  is  drawn  covering  the  total  amount  paid  out,  the  stub  showing 
the  several  coupon  or  other  accounts  and  the  amount  to  be  charged 
to  each.  The  "petty  cash"  book  is  settled  periodically  or  when  the 
fund  is  replenished. 

All  payments  by  check  are  entered  in  the  scratcher  from  the  data 
on  the  stubs.  In  the  scratcher  these  payments  are  grouped  according 
to  .the  accounts  to  be  charged.  The  various  items  composing  each 
charge  are  entered  short,  the  aggregate  being  extended.  The  totals 
in  the  scratcher  settle  with  the  total  payments  shown  by  the  stubs  and 
agree  with  the  face  value  of  the  paid  coupons.  The  scratcher  is  used 
by  the  bookkeepers  in  making  the  necessary  entries  in  the  corporate 
trust  ledger.  But  one  posting  is  made,  covering  the  day's  total  pay- 
ments against  each  account.  Each  sort  of  coupon  is  in  a  separate 
envelope  when  presented  for  payment.  They  are  stacked  like  a  card 
index  in  tin  boxes  of  the  proper  size  to  hold  the  ordinary  coupon  enve- 
lope, and  when  sorted  all  those  containing  coupons  of  the  same  issue 
are  placed  together.  After  the  day's  business  is  settled,  and  the  cou- 
pons of  each  issue  are  found  to  agree  with  the  figures  in  the  scratcher, 
they  are  cancelled  by  having  one  or  more  holes  punched  in  them. 
All  cancelled  coupons  from  each  sort  of  bond  are  kept  together,  and 


124  THE   MODERN  TRUST   COMPANY 

at  proper  intervals  they  are  sent  with  a  statement  of  the  account  to 
the  company  which  issued  the  security. 

The  statement  is  an  ordinary  cash  account  showing  the  balance 
on  hand  from  last  statement,  cash  received,  payments  made,  and 
balance  on  hand  representing  the  value  of  the  coupons  still  outstand- 
ing. With  this  statement  it  is  usual  to  send  a  letter  of  advice  and  a 
form  of  receipt  to  be  signed  and  returned.  The  following  details  are 
shown  in  the  receipt:  description  of  coupons,  when  due,  coupon 
number,  number  of  coupons,  @,  amount,  and  total. 

In  an  issue  of  bonds  subject  to  redemption,  great  care  is  re- 
quired to  detect  coupons  presented  for  payment  which  have  been 
detached  from  called  bonds.  As  calls  are  often  advertised  in  only 
one  or  two  newspapers  they  may  escape  the  notice  of  bondholders ; 
hence  it  is  well  to  refuse  payment  of  the  coupon  due  on  the  date  when 
interest  ceases  unless  the  called  bond  is  presented  at  the  same  time, 
or,  if  the  coupons  are  paid,  pains  should  be  taken  to  notify  the  payee 
of  the  call.  Otherwise  the  bonds  may  be  held  until  the  following 
interest  period,  and  the  unsuspecting  owner's  first  notice  may  be  the 
return  of  the  next  coupon  with  a  statement  that  the  bond  had  been 
previously  called  and  that  interest  had  ceased. 

Occasionally  coupons  are  payable  only  on  the  order  of  the  reg- 
istered owner  of  the  bond  —  another  annoying  pitfall  for  the  coupon 
clerk  to  guard  against.  Fortunately,  such  provisions  are  rare. 

For  the  payment  of  dividends,  dividend  lists  are  prepared  and  certi- 
fied as  correct  by  the  transfer  agent.     The  transfer  agent  may  be  the 
transfer  department  of  the  same  trust  company  which  acts  as  fiscal 
agent,  or  some  other  corporation ;  or,  in  the  case  of  organizations  which 
transfer  their  own  shares  but  employ  a  fiscal  agent  to  distribute  profits, 
it  may  be  the  company  declaring  the  dividend.     The  dividend  list  is 
prepared  from  the  stock  ledger  on  loose  sheets  ruled  in  columns  for 
the  name  and  address  of  the  stockholder,  the  number  of  shares  held, 
the  check  number  and  amount  of  the  dividend,  and  the  name  and 
address  of  the  payee.     When  received  from  the  transfer  agent,  t1 
dividend  sheets  contain  the  names  and  addresses  of  the  stockholde, 
the  number  of  shares  held  by  each,  and  directions  as  to  the  payment 
and  disposition  of  the  dividend.     The  sheets  are  preferably  made  ou- 
on  the  typewriter.     To  the  data  received  the  fiscal  agent  adds  th( 
number  and  amount  of  each  check.    The  dividend  sheets  serve  a; 


THE  MODERN  TRUST  COMPANY. 

190 

Mr_ 

Dear  Sir: 

We  forward  you  to-day  by 
a  package  of  cancelled 


Coupons,  aggregating 


Dollars 


which  have  been  paid  by  us  out  of  funds  deposited  by  your 
Company  for  that  purpose. 

Please  sign   and   return   the   accompanying   receipt. 

Very  truly, 


MANAGER  CORPORATE  TRUST  DEPT. 


CORPORATE   TRUST   DEPARTMENT  12$ 

stubs,  and  from  them  the  checks  are  prepared.  Loose  checks  are 
used,  numbered  consecutively.  The  dividend  sheets  and  corre- 
sponding checks  can  be  distributed  among  a  number  of  clerks  and 
a  long  list  can  be  disposed  of  rapidly.  If  the  dividends  belonging 
to  a  large  number  of  stockholders  are  payable  to  a  single  corpo- 
ration or  individual,  or  if  stock  is  held  by  a  corporation  acting  in 
various  capacities  for  a  number  of  accounts,  such  holdings  can  be 
listed  on  a  single  dividend  sheet,  and  one  check  be  issued  cover- 
ing all.  In  such  cases  a  letter  of  advice  is  sent  with  the  check, 
showing  the  items  represented  by  it  transcribed  from  the  dividend 
sheet.  The  name  of  the  payee  and  the  amount  in  figures  are  written 
on  the  checks  by  hand.  The  amount  in  words  in  the  body  of  the 
check  is  often  filled  in  with  a  rubber  stamp.  For  this  purpose  racks 
of  stamps  are  kept  on  hand,  with  the  various  combinations  needed 
for  dividend  distributions  at  various  rates.  Indelible  ink  is  used  as 
a  safeguard  against  alteration.  Odd  amounts  for  which  no  stamps 
have  been  provided  can  be  written  in  by  hand.  The  amount  stamped 
in  the  body  of  the  check  can  easily  be  compared  with  the  figures 
when  the  checks  are  being  signed. 

The  dividend  check  may  contain  full  information  as  to  the  nature 
of  the  disbursement.  In  this  case  it  is  not  necessary  to  enclose  a  card 
with  the  check.  If  one  is  sent,  the  following  form  is  sufficient :  — 


THE   MODERN   TRUST   COMPANY 

The  enclosed  dividend  check  is  mailed  you  in  accordance  with  the  terms 
of  a  standing  order  on  file  with  this  company. 

Please  deposit  the  check  or  have  it  cashed  promptly. 

No  acknowledgment  is  required. 

Prompt  notice  should  be  given  if  address  is  changed. 


When  no  details  are  given  on  the  check,  it  is  customary  to  enclose 
an  explanatory  card  specifying  the  name  of  the  company,  the  rate  of 
the  dividend,  and  the  date  when  payable,  in  addition  to  the  more 
general  information  given  in  the  form  shown  above. 

The  envelopes  can  be  most  rapidly  and  accurately  prepared  by 
the  use  of  a  mechanical  addressing  device,  and  in  case  of  loss  the 
stencil  remains  to  prove  where  the  dividend  was  sent.  The  stencils 
are  kept  in  boxes,  stacked  on  edge  in  alphabetical  order.  Changes 


126  THE   MODERN   TRUST   COMPANY 

are  made  as  notice  is  received,  so  that  the  list  is  constantly  ready  for 
use.  Where  the  envelopes  are  addressed  by  hand,  this  is  often  done 
at  slack  times,  in  order  to  provide  occupation  for  the  clerks  in  the 
department.  As  each  envelope  is  addressed  it  can  be  dropped  back 
of  the  card  in  the  stockholders'  index  giving  directions  as  to  the  dis- 
position of  the  dividend.  This  makes  it  easy  to  alter  addresses  on 
both  cards  and  envelopes  at  the  same  time  and  to  have  a  set  of 
envelopes  constantly  ready  for  use. 

A  sealing  machine  reduces  to  a  minimum  the  time  consumed  in 
this  process.  No  trust  company  sending  out  large  quantities  of  mail 
can  afford  to  be  without  this  valuable  addition  to  its  office  equip- 
ment. If  a  number  of  checks  payable  to  various  stockholders  are 
mailed  to  the  same  individual  or  company,  it  may  be  worth  while  to 
use  an  alphabetical  sorting  tray  so  that  all  the  checks  to  be  sent  to 
a  single  name  can  be  put  in  the  same  envelope. 

When  the  dividend  checks  are  issued,  the  ledger  account  con- 
taining the  funds  to  meet  the  disbursement  is  charged  through  the 
scratcher  with  the  total  payment.  As  the  checks  are  paid  and  re- 
turned cancelled,  they  are  checked  off  on  the  dividend  list.  The 
amount  of  the  outstanding  checks  is  verified  by  settling  the  deposit 
account  against  which  they  are  drawn.  The  cash  balance  in  the 
account  equals  the  amount  of  the  unpaid  checks.  The  lists  for 
each  company  whose  dividends  the  fiscal  agent  pays  are  filed  chrono- 
logically in  binders. 

The  procedure  in  paying  registered  interest  is  the  same  as  in  pay- 
ing dividends.  In  making  principal  payments,  whether  of  coupon  or 
registered  bonds,  the  securities  are  presented  as  in  the  case  of  coupons, 
and  the  items  are  treated  in  exactly  the  same  way.  If  the  prin- 
cipal is  registered,  a  power  of  attorney  to  transfer  the  security  to  bearer, 
and,  when  required,  evidence  of  the  authority  for  making  the  trans- 
fer, must  accompany  the  papers. 

The  bonds  after  payment  are  cancelled,  unless  the  issue  is  to  be 
extended  or  for  some  other  reason  the  lien  of  the  mortgage  is  not 
extinguished. 

When  the  fiscal  agent  takes  charge  of  the  securities  or  other  assets 
of  a  corporation  and  makes  investments,  collections,  and  disburse- 
ments, the  relation  is  precisely  similar  to  that  of  agent  for  an  indi- 
vidual, and  the  method  of  procedure  is  the  same. 


CORPORATE  TRUST  DEPARTMENT  127 


REGISTRAR 

The  New  York  Stock  Exchange,  like  most  other  stock  exchanges, 
in  its  constitution  requires  that  all  active  listed  stocks  must  be  reg- 
istered. This  Exchange  also  requires  that  a  trust  company  or 
other  agency  shall  not  at  the  same  time  act  as  registrar  and  transfer 
agent  of  the  same  corporation.  In  the  popular  mind,  and  even  in 
the  minds  of  some  trust  company  officers,  the  difference  between  the 
duties  of  the  two  positions  has  been  more  or  less  confused.  Both 
have  been  created  to  safeguard  and  facilitate  the  passing  of  title  to 
shares  of  stock,  but  "the  duties  of  a  transfer  agent  and  a  registrar 
are  not  synonymous;  they  are  distinctive.  One  is  called  upon  to 
examine  and  give  clear  titles  to  property  transfers,  and  the  other  is 
merely  to  record  such  transfers.  Were  both  to  assume  equal  respon- 
sibility, it  would  cause  a  conflict  of  authority  and  a  delay  of  business 
that  would  be  almost  impossible  of  execution,  especially  in  New  York, 
where  the  volume  of  business  is  tremendous.  Consider  the  fact: 
Some  transfer  agents  alone  act  for  corporations  whose  total  capital 
aggregates  a  billion  and  a  half  of  dollars. 

"During  the  days  of  great  speculation  by  officers  of  railroads, 
they  started  the  printing-presses  and  over-issued  many  shares  above 
the  authorized  capital,  causing  panic  and  ruin.  Subsequently,  the 
registrar  was  established  for  the  sole  purpose  of  preventing  such 
over-issue,  assuring  the  investor  that  the  certificate  which  he  had 
purchased  was  one  within  the  amount  of  the  capital  of  the  corpora- 
tion. Now  no  stock  can  be  listed  by  a  corporation  on  the  Stock 
Exchange  without  complying  with  its  rules.  These  rules  require  the 
appointment  of  a  registrar  so  as  to  prevent  any  over-issues. 

"The  form  of  contract  with  the  registrar  is  as  follows:  — 

" i  You  are  hereby  appointed  Registrar  of  this  Company  to  register  its  Capital 
Stock,  consisting  of Shares,  par  value dollars.' 

"This  is  followed  by  a  notice  from  the  Stock  Exchange  authoriz- 
ing the  registrar  to  register  a  certain  amount  of  shares  of 

corporation.  The  authority  contained  in  the  above  merely  pre- 
scribes a  limited  duty,  which  is :  To  record  shares  of  stock  to  a  cer- 
tain amount.  This  service  is  recognized  by  all  corporations,  by  the 


128  THE  MODERN  TRUST  COMPANY 

transfer  agent,  and  by  the  Stock  Exchange.  Where  certificates  are 
subsequently  transferred  and  presented  to  the  registrar  with  the  new 
certificates,  the  registrar  does  not  examine  the  indorsements  or  titles 
to  these  certificates.  They  agree  that  it  is  solely  the  duty  of  the 
transfer  agent  to  make  that  examination  —  a  duty  for  which  the 
transfer  agent  is  suitably  paid,  the  compensation  of  the  registrar 
being  about  one-half  less."  l 

Although  there  are  few  decisions  of  the  court  to  guide  one  to  a 
definition  of  either  the  duties  or  the  responsibilities  of  registrars,  an 
examination  of  the  causes  leading  to  their  appointment  and  of  the 
practical  duties  they  perform  sustains  the  view  quoted  above.  On 
no  other  assumption  can  the  present  position  of  the  registrar  well 
be  explained  or  justified.  Those  registrars  who  hold  the  contrary 
opinion,  that  "the  duties  and  liability  of  registrar  do  not  differ  in  any 
marked  degree  from  those  of  a  transfer  agent, "  *  virtually  duplicate 
the  functions  of  the  transfer  agent.  It  has  been  suggested  that  the 
designation  "agent  to  register  transfers"  would  be  safer  and  more 
correct  than  the  word  "registrar."3  The  latter  name  is,  however, 
in  common  use  and  is  gradually  becoming  better  understood.  Where 
there  is  a  real  risk  of  misinterpretation,  the  trust  company,  before 
accepting  the  position  of  registrar,  can  always  resort  to  the  sim- 
ple expedient  of  executing  a  contract  which  specifically  limits  its 
liability. 

When  the  trust  company  is  appointed  registrar  of  a  stock,  an 
account  is  opened  in  the  record  of  corporate  trusts.  The  abstract 
sheet  should  specify  the  title,  classes  of  stock  to  be  registered,  the 
compensation  to  be  received,  and  any  other  pertinent  facts.  The 
following  sheet,  ruled  in  ordinary  ledger  form,  is  headed  with  the 
trust  number  and  title  of  the  stock.  A  credit  is  made  for  the  total 
authorized  issue  stated  in  shares.  On  the  debit  side  a  charge  is  made 
for  the  total  number  of  shares  registered  as  having  been  issued. 

1  "  Duties  and  Responsibilities  of  a  Registrar,"  E.  C.  Hebbard.  Trust  Companies, 
Vol.  I,  p.  989. 

*  "  The  Duties  and  Liabilities  of  Trust  Companies  acting  as  Transfer  Agents  and 
Registrars,"  Henry  J.  Bowdoin.  Proceedings  Trust  Company  Section,  American  Bank- 
ers' Association,  1900. 

8  "  The  Duties  and  Liabilities  of  Trust  Companies  acting  as  Transfer  Agents  and 
Registrars,"  Felix  Rackermann.  Proceedings  Trust  Company  Section,  American  Bank- 
ers' Association,  1898. 


CORPORATE  TRUST   DEPARTMENT  129 

These  debit  entries  are  initialled  by  the  officer  in  charge  of  the  de- 
partment for  the  total  number  of  shares  issued  and  registered  (the 
total  original  issue).  The  difference  between  the  debit  and  credit 
sides  represents  the  authorized  stock  not  yet  issued.  This  record 
is  kept  as  a  safeguard  against  an  over- issue  of  stock.  It  can  if 
preferred  be  kept  on  cards  or  in  a  small  bound  ledger.  After  the 
entire  authorized  issue  is  registered,  new  certificates  are  registered 
only  as  outstanding  ones  of  an  equal  amount  are  cancelled. 

Each  certificate  received  by  the  registrar  is  examined  and  entered 
in  the  stock  register  before  being  signed  or  cancelled,  as  the  case  may 
be.  A  separate  stock  register  book  is  used  for  each  stock  registered. 
Each  page  of  the  stock  register  is  divided  into  two  sections:  that  on 
the  left,  for  certificates  cancelled,  contains  columns  for  certificate 
numbers  and  number  of  shares ;  the  right-hand  section,  for  certificates 
registered,  has  columns  for  date  of  registry,  name  in  which  new 
stock  is  issued,  certificate  numbers,  shares,  and  date  of  cancellation. 
Proof  of  the  total  issue  is  made  by  subtracting  the  totals  of  the 
"stock  cancelled"  columns  from  the  totals  of  the  "stock  registered" 
columns,  the  balance  being  the  number  of  shares  outstanding.  The 
total  of  outstanding  shares  can  also  be  found  by  listing  the  open 
items  in  the  "certificates  registered"  section. 

If  a  company  has  more  than  one  class  of  stock,  a  separate 
book  is  kept  for  each.  For  inactive  issues,  bound  volumes  of  uni- 
form size  are  satisfactory.  For  large  and  active  issues,  loose  sheets 
should  be  used  so  that  the  work  may  be  divided  among  a  number  of 
clerks-  The  register  can  be  further  divided  into  files  for  loo-share 
certificates,  lo-share  certificates,  and  certificates  for  odd  lots.  A 
binder  should  be  used  which  permits  the  sheets  to  be  readily  inserted 
and  removed. 

In  times  of  great  stock  market  activity,  the  duties  of  the  registrar 
may  be  very  heavy  and,  as  one  day's  work  cannot  go  over  to  the  next, 
it  is  necessary  to  have  an  effective  organization  and  accurate  and 
systematic  methods. 

TRANSFER  AGENT 

Title  to  certificates  representing  ownership  in  the  capital  stock 
of  a  corporation  may  be  transferred  on  the  books  of  the  company  by 
the  owner  in  person  or  by  a  lawfully  constituted  attorney.  A  century 


STOCK  REGISTER 

CERTIFICATES 
CANCELLED 

CERTIFICATES  REGISTERED 

Certi-  1 
cate  No.  Shares 

Date  of 
Registry 

XT                                I  Certi-   1 
-Name                       fioate  No  Shares 

Date  of 

Cancellatioi 

> 

130 


CORPORATE  TRUST  DEPARTMENT  131 

ago  a  separate  certificate  was  often  issued  for  each  share  of  stock. 
When  the  stock  was  sold,  the  owner  usually  made  the  transfer  in 
person,  and  the  original  certificate  was  reissued  with  the  purchaser's 
name  indorsed  upon  it  and  attested  by  the  proper  officer.  With  the 
growth  of  stock  companies  and  vastly  increased  dealings  in  their 
shares,  it  became  necessary  to  facilitate  the  passing  of  title  to  stock. 
The  response  to  this  need  has  been  the  development  of  the  transfer 
agency.  Although  many  companies,  even  large  corporations  whose 
stock  is  actively  dealt  in,  still  transfer  their  own  shares,  it  is  now 
customary  to  appoint  another  responsible  corporation  —  most  often  a 
trust  company  —  to  perform  this  duty.  The  trust  company  occupies 
the  position  of  agent  and  as  such  does  the  work  which  would  devolve 
upon  the  transfer  clerk  of  the  corporation  if  the  transfers  were  made 
in  its  own  office. 

When  no  special  contract  is  entered  into,  "it  would  seem  gener- 
ally safe  to  say  that  the  transfer  agent  will  remain  free  of  any  liabil- 
ity to  its  principal  for  damage  or  loss  so  long  as  the  agent  is  guilty 
of  no  negligence.  ...  It  is  not  an  insurer  and  is  not  to  be  held  to 
infallibility.  It  must,  however,  be  cautious  and  vigilant."  l  Even  in 
the  exercise  of  "caution  and  vigilance,"  moreover,  many  legal  points 
are  involved,  and  liability  may  be  incurred  through  refusal  to  trans- 
fer, if  it  is  later  proved  that  the  papers  were  in  proper  shape,  so  that 
here,  as  in  other  parts  of  a  trust  company's  business,  it  is  a  safe  rule 
to  act  only  on  advice  of  counsel  when  any  doubt  exists  as  to  the  legal- 
ity or  validity  of  a  transfer. 

The  transfer  agent  if  negligent  may  be  liable  not  only  to  the 
principal  for  whom  it  acts,  but  also  under  certain  circumstances  to 
the  purchasers  and  sellers  of  the  shares  which  it  transfers.  When 
the  transfer  agent  is  in  one  state  and  the  corporation  for  which  it 
acts  is  chartered  under  the  laws  of  another,  new  difficulties  may  arise 
from  the  variation  in  statutes  and  local  practice.  In  doubtful  cases, 
when  a  transfer  is  made  by  a  thoroughly  responsible  individual, 
firm,  or  corporation,  a  bond  of  indemnity  can  sometimes  be  taken 
to  protect  the  principal  and  agent  from  loss,  and  prevent  a  refusal  to 
transfer  on  account  of  a  trivial  irregularity.  The  transfer  agent 

1  "  The  Duties  of  Trust  Companies  acting  as  Transfer  Agents  and  Registrars," 
Felix  Rackermann.  Proceedings  Trust  Company  Section,  American  Bankers'  Associa- 
tion, 1898. 


132  THE   MODERN   TRUST   COMPANY 

assumes  far  more  responsibility  than  does  the  registrar.  This  fact 
is  recognized  by  the  larger  although  still  often  inadequate  compen- 
sation which  is  usually  paid  the  transfer  agent. 

The  great  majority  of  transfers  result  from  stock  exchange  sales, 
and  in  these  cases  the  exchange  rules  as  to  "good  deliveries"  must 
be  complied  with.1  Securities  in  the  names  of  individuals  in  fidu- 
ciary capacities  are  not  a  "good  delivery."  The  word  "trustee," 
"  executor,"  "  guardian,"  etc.,  on  the  face  of  the  certificate  is  notice  to 
the  transfer  agent  of  the  existence  of  a  trust,  and  since  the  instrument 
or  authority  creating  the  trust  may  give  no  power  of  sale,  the  proper 
authority  must  be  shown  before  a  transfer  can  be  made.  Stock 
held  in  this  way  is  often  first  transferred  by  the  seller  into  the  name 
of  some  individual  or  firm  (for  instance,  the  brokers  commissioned 
to  dispose  of  it),  and  is  then  offered  for  sale. 

The  New  York  Stock  Exchange,  before  a  stock  can  be  listed, 
requires  a  statement  of  the  location  of  the  transfer  office  and  names 
of  the  transfer  agents,  and,  after  the  stock  is  listed,  any  change  in 
the  place  of  transfer  must  be  approved  by  the  proper  committee  of 
the  Exchange. 

Stock  exchange  rules  also  prescribe  the  kind  of  certificates 
which  shall  be  used  for  listed  stocks.  They  require  the  use  of  en- 
graved plates  and  such  combinations  of  color  as  will  prevent  counter- 
feiting through  photographic  or  other  processes.  Stock  certificates 
are  bound  in  books,  one  to  a  page,  and  numbered  in  consecutive 
order.  The  officers  of  the  issuing  corporation  sign  the  certificates 
and  affix  the  company's  seal,  and  then  intrust  them  to  the  transfer 
agent.  At  the  time  of  making  a  transfer  the  transfer  agent  enters 
on  the  certificate  the  name  of  the  new  stockholder,  the  number  of 
shares,  and  the  date  of  issue,  signs  the  certificate,  and  then  sends  it 
to  the  registrar  to  be  countersigned  and  registered.  It  is  often  stated 
on  the  face  of  the  certificate  that  it  is  valid  only  when  signed  by  the 
transfer  agent  and  countersigned  by  the  registrar.  The  stub  gives 
the  certificate  number,  the  date  and  name  in  which  it  is  issued,  and 
the  number  of  shares.  When  the  certificate  is  delivered,  a  receipt 
may  be  taken  on  the  stub.  On  the  back  of  the  certificate  an  irrevo- 
cable power  of  attorney  is  engraved,  the  following  being  the  form 
in  general  use :  — 

1  See  Appendix.    New  York  Stock  Exchange,  Rules  for  Delivery,  p.  287. 


CORPORATE  TRUST  DEPARTMENT          133 


13 1  «             For  Value   Received   hereby  sell,  assign,  and  Sg| 

3  6  J  transfer  unto '     ^? 

||  g>  Shares  ||  '| 

J-l |  of  the  Capital  Stock  represented  by  the  within  Certificate,  *  %-$ 

2*0  !  and  do  hereby  irrevocably  constitute  and  appoint *§  5  Ir 

$£>.  Attorney  to  ««» 

1 1 1.  c  transfer  the  said  stock  on  the  Books  of  the  within  named  ^  § 

jfe.^  Company  with  full  power  of  substitution  in  the  premises.  f|  ° 

I  j!  S         Dated 19 

,°  «  |o         In  presence  of  8  3-g 

c.n'o  ?*«  S 


When  a  certificate  of  stock  is  to  be  transferred,  the  owner  signs 
the  power  of  attorney,  the  signature  is  witnessed  and  is  guaranteed 
by  a  member  of  the  Stock  Exchange.  To  complete  the  transfer,  it  is 
then  necessary  only  to  fill  in  the  name  of  the  purchaser  and  the  name 
of  the  clerk  who  acts  as  attorney.  If  the  name  of  the  purchaser  or 
his  attorney  is  not  inserted,  the  certificate  is  said  to  be  in  bearer 
form,  which  means  that  it  is  ready  for  transfer  at  any  time  and  can 
pass  from  one  owner  to  another  by  delivery  of  the  certificate.  In 
this  way  a  certificate  may  pass  through  many  hands  without  any 
transfers  being  made.  When  the  name  of  the  attorney,  either  a 
firm  or  an  individual,  has  been  filled  in,  but  it  is  not  desired  to 
transfer  the  shares,  a  power  of  substitution  in  the  following  form  is 
stamped  on  the  back  of  the  certificate  and  executed.  This  again 
makes  the  certificate  a  good  delivery. 

I  (or  We)  hereby  irrevocably  constitute  and   appoint 

my  (our)  substitute  to 

transfer  the  within  named  Stock  under  the  foregoing  Power 
of  Attorney,  with  like  Power  of  Substitution. 
Dated 19 


In  presence  of 


On  presentation  to  the  transfer  agent,  the  power  of  attorney  must 
be  carefully  scrutinized  to  see  whether  it  has  been  properly  executed, 
witnessed,  and  guaranteed,  before  the  stock  is  transferred. 


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134 


CORPORATE  TRUST   DEPARTMENT  135 

It  is  a  common  practice  to  paste  the  cancelled  certificates  back 
in  the  books  from  which  they  were  originally  taken,  the  open  items 
being  represented  by  the  stubs  to  which  no  certificates  are  attached. 
This  is  analogous  to  the  almost  forgotten  custom  of  pasting  can- 
celled checks  in  the  books  from  which  they  were  torn.  Stamping 
the  stubs  with  the  date  of  cancellation,  arranging  the  certificates 
chronologically  as  cancelled,  those  for  each  day  in  numerical  order, 
and  filing  the  packages  by  dates,  is  the  more  modern  method.  The 
other  plan  serves  the  purpose  in  the  case  of  a  very  inactive  stock. 

In  addition  to  the  abstract  sheet  in  the  record  of  corporate  trusts, 
the  transfer  agent's  records  are  kept  in  stock  transfer  books  and 
stock  ledgers.  Bound  transfer  books  are  used,  a  separate  one  being 
provided  for  each  issue  of  stock.  At  the  top  of  each  page  is  the  name 
of  the  corporation  whose  shares  are  transferred,  followed  by  the  state- 
ment, "The  undersigned,  owners  and  holders  of  stock  of  the  above- 
mentioned  company,  for  value  received  do  hereby,  by  our  respective 
attorneys,  duly  appointed,  respectively  assign  said  shares  of  such 
capital  stock  in  the  manner  below  set  forth."  The  rest  of  the  page 
is  divided  into  two  sections,  —  the  left  hand  for  certificates  cancelled, 
and  the  right  hand  for  certificates  issued.  The  "cancelled"  section 
contains  columns  for  the  numbers  of  the  certificates,  the  number  of 
shares  represented  by  each,  the  ledger  folio,  names  in  which  stock 
was  registered,  and  a  column  in  which  the  attorney  making  the  trans- 
fer signs  his  name.  The  "  certificates  issued  "  section  has  columns 
for  date,  number  of  certificate,  number  of  shares,  ledger  folio,  name 
and  address  of  stockholder.  The  total  number  of  shares  surrendered 
and  cancelled  agrees  with  the  total  number  of  shares  issued.  For 
an  active  stock,  two  sets  of  transfer  books  used  on  alternate  days 
for  making  transfers,  and  postings  to  the  stock  ledgers,  respectively, 
greatly  facilitate  the  work  of  both  transfer  clerks  and  bookkeepers. 

Another  form  of  transfer  book  is  the  following :  at  the  left  of  each 
right-hand  page  are  columns  headed  ledger  folio,  certificate  number, 
and  shares.  To  the  right  of  these  columns  under  the  words  "  for 
value  received"  the  names  on  the  certificates  to  be  cancelled  appear 
at  the  top  of  the  page;  below  them  the  words  "do  hereby  assign  and 
transfer  to, "  with  the  names  into  which  the  shares  are  transferred, 
and  at  the  bottom  of  the  page  the  name  of  the  corporation  and  the 
signature  of  the  stockholder  or  attorney  who  makes  the  transfer. 


136  THE  MODERN  TRUST  COMPANY 

Each  certificate  cancelled  and  each  one  issued  occupies  one  line, 
the  necessary  data  for  posting  in  the  stock  ledger  appearing  in  the 
columns  at  the  left  of  the  page.  The  shares  column  is  ruled  across 
the  middle  and  at  the  bottom  to  show  the  totals  of  shares  cancelled 
and  issued,  which  must  agree.  The  left-hand  page  is  ruled  in  four 
columns :  placed  to  order  of,  shares,  transfer  and  issue  certificate  to, 
and  shares;  and  is  used  when  certificates  are  placed  to  order  and 
instructions  for  transfer  are  given  later. 

Either  of  the  forms  of  transfer  book  described  makes  it  possible 
to  transfer  into  one  certificate  a  number  of  certificates  previously 
standing  in  different  names,  as  all  items  which  are  to  go  to  the  same 
name  can  be  grouped  together.  In  the  old  form,  in  which  a  separate 
transfer  was  made  by  the  attorney  representing  each  owner,  this 
could  not  be  done,  consequently  a  single  individual  buying  from 
different  sources  would  receive  at  least  one  certificate  representing 
each  lot.  When  the  shares  represented  by  part  of  a  certificate  are 
sold,  the  number  to  be  transferred  is  stated  in  the  power  of  attorney, 
and  new  certificates  are  issued  covering  the  shares  sold  and  the 
balance  which  is  reissued  without  change  of  name.  When  an 
exchange  of  certificates  in  the  same  name  is  desired,  splitting  a 
larger  certificate  into  several  for  smaller  amounts  or  consolidating 
several  small  certificates  into  a  large  one,  the  title  to  the  shares  does 
not  change.  The  transaction  shows  on  both  sides  of  the  transfer 
book  as  an  exchange  of  certificates  only,  and  no  power  of  attorney 
is  required. 

If  sales  are  made  to  various  purchasers  of  shares  represented  by 
a  single  certificate,  the  stock  may  be  delivered  "by  transfer."  In 
other  words,  the  seller  takes  the  certificate  to  the  transfer  agent  and 
makes  the  necessary  transfers,  either  transferring  the  stock  directly 
into  the  names  of  the  purchasers  or  else  placing  it  to  their  order. 
In  the  latter  case,  the  transfer  agent  does  not  issue  new  certificates 
until  written  instructions  are  received  from  the  persons  to  whose 
order  the  stock  was  placed.  If  such  instructions  are  not  received 
within  a  fixed  time  or  before  the  transfer  books  close  for  dividend 
or  other  purposes,  the  stock  is  transferred  into  the  names  of  the  firms 
or  individuals  to  whose  order  it  had  been  placed. 

The  stock  ledger  can  be  bound  or  loose-leaf.  For  active  issues, 
the  loose-leaf  form  is  preferable.  There  is  a  separate  ledger  for  each 


CORPORATE  TRUST  DEPARTMENT  137 

company  whose  stock  is  transferred.  The  stockholder's  name  ap- 
pears at  the  top  of  the  page,  and  the  ordinary  form  of  stock  ledger  is 
used  with  a  balance  column  in  the  centre.  The  left-hand  side  of  the 
page  shows  certificates  cancelled,  and  has  columns  for  date,  name, 
transfer  folio,  certificate  numbers,  and  shares.  The  certificates 
issued  are  shown  in  a  corresponding  series  of  columns  on  the  right- 
hand  side  of  the  page. 

If  shares  are  issued  before  they  are  fully  paid,  and  instalments 
are  called  for  from  time  to  time,  the  face  of  the  certificate  bears 
the  statement  that  the  first  instalment  of  a  specified  amount  has 
been  paid,  and  later  payments  are  indorsed  on  the  back  of  the 
certificate.  For  such  shares  the  stock  ledger  requires  the  addition 
of  money  columns  on  both  debit  and  credit  sides,  so  that  the  paid- 
in  value  as  well  as  the  number  of  shares  may  show.  In  making 
transfers,  both  the  number  of  shares  and  amount  paid  in  are  speci- 
fied. It  is  not  necessary  to  record  the  paid-in  value  when  the  stock 
is  full  paid  or  when  there  is  no  likelihood  of  further  instalments 
being  called  for. 

Postings  are  made  from  the  transfer  book  on  the  day  following 
that  on  which  the  transfer  was  made.  When  a  loose-leaf  stock 
ledger  is  used,  it  is  advisable  to  make  one  person  responsible  for  the 
volume  and  to  require  him  to  initial  each  sheet  which  is  inserted.  A 
transfer  file  is  kept  for  closed  accounts.  The  leaves  are  kept  in 
alphabetical  order  both  in  the  stock  ledger  and  in  the  file.  Dividend 
lists  are  taken  off  on  the  typewriter  on  sheets  such  as  have  already 
been  described.1  Instead  of  closing  the  transfer  books  while  the 
dividend  is  being  prepared,  the  custom  is  growing  of  declaring  divi- 
dends payable  to  stockholders  of  record  at  the  close  of  business  on  a 
fixed  date  some  time  in  advance,  the  books  being  closed  only  over 
night.  This  obviates  the  many  delays  and  annoyances  incident  to 
keeping  the  transfer  books  closed  for  any  length  of  time,  and  is  a 
practice  heartily  to  be  commended.  It,  however,  necessitates  having 
the  stock  records  in  such  form  that  a  trial  balance  can  be  rapidly 
taken  off.  Loose-leaf  ledgers  and  plenty  of  clerical  assistance  make 
this  a  simple  matter,  as  the  ledger  can  be  divided  and  settled  by 
letters  or  other  arbitrary  divisions.  If  the  trial  balance  cannot  be 
taken  off  over  night,  no  transfers  are  posted  till  it  is  completed. 

1  See  p.  124. 


138  THE  MODERN  TRUST   COMPANY 

The  method  of  paying  a  dividend  has  already  been  described  in 
connection  with  the  duties  of  the  fiscal  agent.1 

Registered  bonds  are  transferred  exactly  like  stock.  Usually  the 
same  bonds  are  reissued  after  the  change  of  ownership  has  been 
recorded  on  the  back  of  the  bonds.  Sometimes  a  power  of  attorney 
is  engraved  on  the  back,  as  in  the  case  of  stock  certificates,  and  a 
new  bond  is  issued  whenever  a  transfer  is  made.  If  the  original 
bond  is  to  be  reissued,  loose  powers  of  attorney  are  used  in  making 
transfers.  Both  transfer  books  and  ledgers  for  bond  issues  are  kept 
in  the  same  way  as  those  for  stocks,  and  the  method  of  paying  interest 
on  registered  bonds  is  similar  to  that  of  paying  dividends. 

When  a  stock  is  listed  on  the  stock  exchange  of  more  than  one 
city,  a  transfer  office  is  maintained  in  each.  If  the  stock  ledgers 
are  kept  in  one  city  as  headquarters,  the  other  transfer  agents  report 
daily  all  transfers  they  have  made,  furnishing  copies  of  the  transfer 
sheets  from  which  postings  are  to  be  made  in  the  stock  ledgers,  and 
sending  the  cancelled  certificates  to  the  headquarters  city  the  fol- 
lowing day.  If  stock  ledgers  are  kept  in  each  city,  the  transfer 
agents  are  required  to  report  daily  to  each  other  the  number  of 
shares  cancelled  in  a  city  other  than  that  in  which  they  were  issued, 
and  therefore  discharged  from  the  books  of  the  issuing  city.  The 
better  plan  is  to  keep  the  stock  ledgers  in  the  headquarters  city. 

MANAGER   OF  UNDERWRITING   SYNDICATES 

"An  important  function  of  the  private  banker  is  'placing'  secu- 
rities for  corporations  issuing  them  —  that  is,  undertaking  to  dispose 
of  an  entire  issue,  or  a  specific  amount  of  an  issue,  in  the  market 
upon  certain  terms  agreed  upon.  Ordinarily  the  price  is  fixed  by 
agreement  with  the  officers  of  the  corporation  issuing  its  shares  or 
bonds,  either  on  its  first  organization  or  a  reorganization,  or  on  an 
increase  of  capital,  and  the  banking  house  receives  a  commission  on 
the  amount  disposed  of  by  it.  Sometimes  the  issue,  or  a  certain  por- 
tion of  it,  is  underwritten  by  the  banking  house,  which  means  that  it 
obligates  itself  to  dispose  of  the  entire  amount  on  the  terms  agreed 
upon,  and  what  it  fails  to  sell  on  those  terms  it  is  bound  to  take  and 
pay  for  itself.  In  case  of  a  large  transaction  of  this  kind,  a  syndicate 

1  See  p.  124. 


CORPORATE  TRUST  DEPARTMENT          139 

may  be  formed  consisting  of  a  number  of  bankers  and  banking 
houses,  who  agree  together  and  with  the  other  party  concerned  to 
carry  the  operation  through.  Each  member  of  the  syndicate  binds 
himself  to  take  a  certain  portion  of  the  securities  and  to  furnish  his 
proportion  of  any  cash  that  may  be  required  in  financing  the  opera- 
tion, and  for  this  service  a  certain  percentage  of  the  amount  is  to  be 
paid  as  a  commission.  .  .  .  This  device  has  been  resorted  to  largely 
in  the  consolidation  of  industrial  concerns  in  those  combinations 
known  as  'trusts'  and  in  floating  new  issues  of  railroad  stocks  or 
bonds.  It  transfers  the  risk  from  the  corporations  to  the  syndicates 
and  concentrates  and  facilitates  financial  operations  that  are  too 
large  for  one  concern  to  handle."  * 

What  is  true  of  the  private  banker  also  applies  to  the  trust  com- 
pany. It  may  become  a  member  of  underwriting  syndicates,  in 
which  case  its  banking  department  only  is  concerned  in  the  trans- 
action. When,  however,  the  trust  company  either  organizes  a  syndi- 
cate itself  or  is  chosen  as  manager,  the  machinery  of  the  corporate 
trust  department  may  be  called  into  play.  The  manager  of  an  un- 
derwriting syndicate  is  usually  chosen  from  among  its  members  to 
take  charge  of  the  details  of  the  transaction.  For  this  service  a  com- 
mission is  paid.  The  members  of  the  syndicate  may  be  called  on 
for  cash  representing  the  value  of  unsold  securities,  which  are  turned 
over  to  them,  to  be  held  subject  to  the  call  of  the  manager.  Such 
"syndicated"  securities  cannot  be  disposed  of  until  the  termination 
of  the  underwriting  agreement,  the  manager  alone  being  empowered 
to  trade  in  them  for  the  benefit  of  the  syndicate  as  a  whole.  When 
the  syndicate  is  formed  for  the  purchase  and  sale  of  bonds  of  recognized 
value,  the  issue  is  sometimes  over-subscribed  as  soon  as  it  is  offered, 
and  in  this  case  the  members  may  not  -be  required  to  advance  any 
money,  and  the  manager's  only  duties  are  to  pay  for  the  securities,  re- 
ceive payment  from  the  purchasers,  and  distribute  profits  to  the  mem- 
bers of  the  syndicate.  To  float  an  undesirable  issue,  stock  jobbing 
operations  are  sometimes  resorted  to,  and  the  help  of  various  bankers 
and  brokers  is  enlisted  to  hold  or  advance  the  price  of  the  new  secu- 
rities. Needless  to  say,  this  is  business  in  which  a  trust  company 
should  not  engage. 

The  bookkeeping  of  syndicates  consists  of  cash  accounts  repre- 

1  "  The  Modern  Bank,"  Amos  Kidder  Fiske,  p.  224  et  seq. 


140  THE  MODERN  TRUST  COMPANY 

senting  the  operations  of  the  syndicate  as  a  whole  and  the  interest  of 
each  of  its  members.  A  record  is  also  kept  of  the  securities  received 
and  disposed  of. 

The  operations  of  underwriting  syndicates  are  usually  carried  on 
with  the  least  possible  amount  of  publicity,  and  the  members  are 
rarely  given  more  than  the  barest  statements  of  final  results.  If  a 
syndicate  is  very  successful,  partial  distributions  of  profits  are  made 
from  time  to  time.  When  the  securities  have  all  been  sold,  or  the 
syndicate  has  been  dissolved  through  the  expiration  of  a  time  limit, 
the  manager  closes  the  accounts  and  distributes  the  final  profits.  If 
the  syndicate  has  been  unsuccessful,  its  termination  may  leave  the 
members  in  possession  of  securities  which  cost  them  more  than  the 
market  value  and  which  cannot  be  disposed  of  except  at  a  loss. 

DEPOSITARY  UNDER  PLANS  OF   REORGANIZATION 

While  in  theory  the  railroad  mortgage  is  similar  to  that  on  the 
smallest  dwelling  house,  the  analogy  ends,  in  practice,  when  a  de- 
fault occurs.  With  the  dwelling  house,  the  lender  forecloses  the 
mortgage  and  effects  the  sale  of  the  property.  In  the  case  of  a  rail- 
road the  value  of  the  security  depends  on  the  system  remaining  in- 
tact. When  interest  defaults,  a  committee  representing  the  security 
holders  is  usually  formed  and  a  plan  of  reorganization  is  agreed  upon 
in  order  to  prevent  the  disintegration  of  the  system  by  foreclosure 
of  the  mortgage  or  mortgages  secured  on  its  component  parts. 

The  reorganization  committee,  either  before  or  after  formulating 
a  plan  for  the  rehabilitation  of  the  property,  calls  for  the  deposit  of 
the  defaulted  securities,  most  frequently  with  some  trust  company 
designated  as  depositary.  In  exchange  for  the  securities,  temporary 
receipts  are  given,  good  for  a  limited  number  of  days  only,  and  these 
are  later  exchanged  for  the  depositary's  engraved  certificates  of 
deposit  which  are  negotiable  on  the  stock  exchange. 

Trust  companies  usually  have  on  hand  a  supply  of  such  engraved 
certificates,  on  which  the  necessary  details  of  each  reorganization 
can  be  printed.  The  certificate  specifies  the  kind  and  value  of  the 
security  deposited  and  the  terms  under  which  the  certificate  is  issued. 
It  states  that  the  trust  company,  as  depositary  under  the  plan  of  re- 
organization formulated  by  a  committee  whose  names  are  recited, 


CORPORATE  TRUST  DEPARTMENT  141 

holds  the  securities  in  accordance  with  the  terms  of  an  agreement 
which  is  assented  to  by  the  security  holders  by  the  deposit  of  their 
stocks  or  bonds  and  acceptance  of  the  certificates  of  deposit. 

Reorganizations  may  be  made  necessary  either  by  a  corporation's 
inability  to  meet  fixed  charges  or  by  the  consolidation  of  several  cor- 
porations into  a  single  company.  In  either  case,  the  duty  of  the 
trust  company  acting  as  depositary  is  the  same.  The  securities  are 
virtually  held  in  escrow,  the  reorganization  committee  and  the  bond- 
holders being  the  other  parties  to  the  agreement. 

Reorganization  committees  are  usually  formed  of  individuals 
who  are  more  or  less  directly  interested  in  the  securities  affected  by 
the  default  and  whose  names  are  a  guarantee  of  good  faith.  The 
initiative  in  the  formation  of  such  protective  committees  is  usually 
taken  by  the  largest  security  holders,  and  the  membership  is  indica- 
tive of  the  interests  represented.  The  scheme  of  reorganization 
aims  to  bring  the  fixed ,  charges  safely  within  the  earning  power  of 
the  corporation  and  to  determine  equitably  the  rights  and  claims 
of  all  security  holders.  As  important  members  of  reorganization 
committees,  the  officers  of  a  trust  company  are  often  called  on  to 
solve  such  problems. 

The  corporate  trust  department  is  interested  not  so  much  in 
formulating  plans  of  reorganization  as  in  carrying  out  their  pro- 
visions. For  the  protection  of  security  holders  prompt  action  may 
be  necessary,  and  the  mere  physical  work  of  receiving  deposits  is  often 
very  great.  Sometimes  the  depositary  gives  notice  that  only  a  fixed 
number  of  lots  or  " schedules"  of  securities  will  be  received  each  day. 
To  expedite  matters,  a  cursory  examination  of  the  securities  is  made 
and  the  so-called  five-day  receipt  is  given  which  permits  a  more 
careful  and  thorough  examination  before  the  certificate  of  deposit 
is  issued.  Just  as  much  care  is  taken  in  receiving  stocks  and  bonds 
under  plans  of  reorganization  as  when  they  are  presented  for  trans- 
fer, because  the  title  to  the  securities  vests  in  the  committee  in  ac- 
cordance with  the  terms  of  the  plan  of  reorganization,  and  in  case 
of  foreclosure  and  the  issue  of  new  securities  in  lieu  of  those  surren- 
dered, the  transfers  must  actually  be  made  so  as  to  carry  out  the 
required  legal  formalities. 

As  each  lot  of  securities  is  received  it  is  listed  and  given  an  acces- 
sion number  corresponding  to  the  number  of  the  temporary  receipt. 


142  THE  MODERN  TRUST  COMPANY 

The  securities  forming  each  schedule  are  kept  together,  their  final 
disposition  depending  on  the  provisions  of  the  plan  under  which 
they  are  received.  To  be  negotiable  the  engraved  certificates  of 
deposit  are  often  required  by  stock  exchange  rules  to  be  registered 
like  certificates  of  stock. 

When  assessments  are  called  for,  or  distributions  of  principal  or 
interest  are  made,  the  certificates  of  deposit  are  presented  at  the 
office  of  the  trust  company  to  have  the  proper  indorsements 
stamped  upon  them.  On  the  successful  carrying  through  of  the 
plan  of  reorganization,  the  certificates  of  deposit  are  returned  to  the 
trust  company  and  the  new  securities  are  delivered  in  their  place. 

For  each  reorganization,  separate  books  are  used.  The  reorgani- 
zation record  bears  the  title  of  the  account  and  of  the  trust  company 
and  the  capacity  in  which  it  acts.  The  left-hand  page  contains 
columns  for  the  date  of  each  deposit,  the  number  of  the  certificate 
of  deposit,  the  name  of  the  owner,  and  the  various  classes  of  secu- 
rities deposited.  On  the  right-hand  page  are  columns  headed  by 
the  titles  of  the  new  securities  to  be  given  in  exchange  and  one  in 
which  receipts  may  be  taken  when  the  securities  are  actually  de- 
livered. The  book  is  printed  and  ruled  to  suit  the  requirements  of 
each  reorganization.  The  footings  of  the  columns  are  used  to  prove 
the  correctness  of  the  distributions  under  each  schedule.  When  a 
certificate  of  deposit  is  cancelled  and  one  or  more  are  issued  in  its 
place,  the  schedule  represented  by  the  cancelled  certificate  is  ruled 
out  and  the  new  ones  are  entered.  Assessments  or  distributions  of 
cash  or  securities  are  entered  in  the  reorganization  record,  and  the 
certificates  of  deposit  are  appropriately  stamped. 

Each  plan  of  reorganization  may  need  the  elaboration  of  fur- 
ther details  to  meet  its  special  requirements,  and  before  the  work  is 
completed  the  trust  company  acting  as  depositary  may  be  retained 
in  other  capacities,  such  as  trustee,  transfer  agent,  or  registrar. 

ASSIGNEE   AND   RECEIVER 

When  the  affairs  of  a  firm  or  corporation  are  placed  in  the  care 
of  a  trust  company  as  the  result  of  insolvency  or  any  other  cause, 
the  corporate  trust  department  takes  charge  of  the  business.  The 
appointment  of  the  trust  company  may  be  made  at  the  instance  of 
the  owners  of  the  business  who  wish  to  protect  their  property,  or  at 


CORPORATE   TRUST  DEPARTMENT  143 

the  instance  of  creditors  who  wish  to  protect  their  interests.  It  may 
be  effected  by  deed  of  assignment,  in  which  case  the  powers  and 
duties  of  the  trust  company  so  appointed  assignee  are  governed  and 
regulated  by,  and  in  accordance  with,  the  terms  of  such  deed.  If 
the  business  is  to  be  wound  up,  the  assignee's  duties  usually  consist  of 
collecting  the  debts  due  and  collectible,  and  requiring  creditors  to 
prove  their  claims,  which  are  scheduled  for  payment  and  met  and 
paid  in  whole  or  ratably  in  part  as  the  available  assets  permit.  An 
assignee  is  held  to  strict  accountability,  and  not  only  must  use  the 
best  business  judgment,  but  must  act  in  strict  compliance  with  legal 
requirements,  frequently  securing  an  opinion  of  counsel,  or,  in  the 
case  of  certain  acts,  an  order  of  court.  As  the  expert  knowledge  of 
those  who  have  been  conducting  the  business  is  often  of  value,  it  is 
not  unusual  for  the  assignee  to  retain  the  services  of  such  employees 
as  are  needed,  and  frequently  a  representative  of  a  firm  which  is  in 
liquidation  is  made  a  co-assignee. 

What  has  been  said  of  the  requirements  of  the  trust  company  as 
assignee  applies  in  part  to  the  requirements  imposed  upon  it  as 
receiver.  The  term  "receiver,"  however,  is  usually  confined  in  its 
application  to  an  appointee  of  a  court.  The  object  of  a  receivership 
is  usually  to  tide  an  embarrassed  enterprise  over  a  period  of  diffi- 
culty. The  business  must  be  conducted  intelligently,  and  needed 
capital  sometimes  supplied  until  times  of  greater  prosperity  or  the 
successful  carrying  out  of  a  plan  of  reorganization  puts  it  on  a  sol- 
vent basis  and  makes  possible  the  discharge  of  the  receiver  and  the 
return  of  the  property  to  its  owners.  The  receiver  is  a  ministerial 
officer  of  the  appointing  court,  with  no  powers  but  those  conferred 
upon  it  by  such  court.  A  trust  company  acting  as  receiver  is  better 
able  than  an  individual  to  furnish  additional  capital,  if  amply  secured, 
and  thus  successfully  to  meet  the  difficulties  which  withdrawal  of 
credit  and  restricted  capital  have  temporarily  brought  upon  an 
otherwise  prosperous  business.  The  courts  authorize  the  issue  of 
receivers'  certificates  to  provide  funds  for  purchase  of  equipment 
and  the  proper  maintenance  of  the  property  and  conduct  of  the 
business  when  the  creditors  are  benefited  by  such  expenditures. 
Such  certificates  may  be  made  a  first  lien  on  all  assets,  taking  pre- 
cedence even  of  mortgages  and  other  secured  obligations.  The 
receiver  thus  secures  the  capital  necessary  to  make  the  property 


144  THE  MODERN   TRUST   COMPANY 

more  productive  and  to  secure  the  largest  return  from  the  business. 
In  some  trust  companies  a  small  committee  of  the  board  of  directors 
is  appointed  to  act  with  the  officer  in  charge  of  the  affairs  of  the 
involved  business,  and  where  technical  knowledge  is  required,  the 
services  of  experts  may  also  be  secured. 

A  set  of  double  entry  books  is  opened  for  each  assigneeship  and 
receivership,  the  controlling  account  alone  appearing  in  the  general 
books  of  the  corporate  trust  department.  According  to  the  nature 
of  the  case,  the  business  may  be  transacted  at  the  office  of  the  trust 
company  or  at  that  of  the  insolvent  company. 

AGENT 

Trust  companies  as  agent  often  take  up  lines  of  business  which 
they  either  cannot  or  would  not  engage  in  on  their  own  account. 
Thus,  a  trust  company  can  act  as  agent  for  fire  or  life  insurance  com- 
panies, for  water,  gas,  and  other  public  service  corporations.  In 
new  communities  and  where  it  is  difficult  to  find  responsible  repre- 
sentatives, the  trust  company  can  often  render  efficient  service  and 
secure  a  steady  income  without  risk  by  assuming  agencies  of  various 
sorts.  The  books  and  methods  employed  depend  on  the  duties  to 
be  performed,  but  conform  as  nearly  as  possible  to  the  general  system 
in  use,  with  such  auxiliary  records  as  may  be  needed  in  each  case. 

ACCOUNTS 

Whether  there  be  only  one  trust  department  or  two,  the  book- 
keeping for  both  corporate  and  individual  trusts  can  usually  be  com- 
bined. A  single  general  ledger,  journal,  and  cash  book  are  used,  and 
in  these  books  the  transactions  of  the  two  departments  are  separated 
by  having  the  necessary  controlling  accounts  for  each.  The  same 
division  is  maintained  on  the  balance  sheets. 

Whatever  the  capacity  in  which  the  trust  department  acts,  each 
corporate  account,  like  an  individual  trust,  when  received  is  given 
an  accession  number  by  which  it  is  identified.  The  record  of  cor- 
porate trusts,  which  corresponds  to  the  record  of  individual  trusts,1 
contains  an  abstract  sheet  showing  the  details  of  each  appointment, 
followed  by  other  sheets  on  which  are  shown  the  securities  held  or 

1  For  Record  of  Individual  Trusts,  see  p.  188. 


CORPORATE  TRUST   DEPARTMENT  145 

such  other  facts  as  may  result  from  the  character  of  the  account. 
When  for  convenience  all  trusteeships  of  corporation  mortgages 
are  grouped  in  a  special  volume,  an  abstract  sheet  should  be  inserted 
in  its  numerical  place  in  the  general  record  of  corporate  trusts, 
giving  the  title  of  the  account  and  referring  for  further  information 
to  the  special  record  of  corporation  mortgages. 

A  blank  form  of  abstract  sheet  is  used,  or  a  series  of  printed 
forms  may  be  prepared  to  meet  the  requirements  of  the  various 
capacities  in  which  the  corporate  trust  department  acts.  The  form 
adapted  to  trusteeships  has  already  been  described,1  as  well  as  the 
sheets  which  follow  for  records  of  bonds  received,  certified,  and 
delivered,  and  of  bonds  paid,  cancelled,  and  cremated.  For  invest- 
ments, sheets  similar  to  those  in  the  record  of  individual  trusts  are 
used. 

The  corporate  trust  ledger  is  exactly  like  the  individual  trust 
ledger,  and  where  there  is  only  one  trust  department  the  accounts 
are  kept  in  the  same  volume.2 

COMPENSATION 

When  acting  as  trustee  under  corporation  mortgages,  a  definite 
charge  may  be  made  for  accepting  the  trust,  and  a  fixed  amount  per 
annum  thereafter  for  paying  coupons  and  performing  other  duties. 
For  the  certification  of  bonds  it  is  usual  to  charge  fifty  cents  per  bond 
in  the  case  of  large  issues,  and  one  dollar  for  small  issues.  The 
figures,  however,  vary  in  different  places.  The  charge  for  certify- 
ing the  bonds  may  be  the  only  one,  although  an  additional  charge  is 
usually  made  for  counsel  fees.  In  case  of  default  and  consequent 
foreclosure  of  the  mortgage,  extra  payment  is  made  to  the  trustee 
covering  all  services  incident  to  the  foreclosure. 

For  the  disbursement  of  sinking  funds,  interest,  or  coupons,  the 
temporary  use  of  the  money  may  be  considered  adequate  compen- 
sation, if  the  amount  involved  is  large.  A  commission  on  the  sum 
distributed  or  a  fixed  amount  is  charged  when  acting  as  fiscal  agent, 
apart  from  duties  in  other  capacities.  For  acting  as  registrar  or  as 
transfer  agent  it  is  usual  to  make  a  fixed  charge  per  annum,  based  on 
the  amount  of  labor  involved.  The  transfer  agent  is  usually  paid 
about  twice  as  much  as  the  registrar.  Compensation  for  acting  as 

1  See  p.  117.  2  For  Individual  Trust  Ledger,  see  p.  198. 


146  THE  MODERN   TRUST   COMPANY 

manager  of  an  underwriting  syndicate  may  be  a  fixed  sum  or  a  com- 
mission, according  to  the  provisions  of  the  underwriting  agreement. 
For  acting  as  depositary  under  plans  of  reorganization,  assignee,  or 
receiver,  a  lump  sum  is  usually  paid  covering  all  services.  Agency 
work  of  various  sorts  is  paid  for  in  accordance  with  the  usual  practice 
in  the  business  which  is  undertaken ;  a  fixed  sum,  or  a  fixed  sum  and 
a  commission,  or  a  commission  only,  may  be  received. 

The  trust  company  is  in  a  position  to  render  valuable,  and  often 
indispensable,  aid  to  its  corporate  clients.  Large  amounts  being 
involved,  the  great  railroad  and  industrial  corporations  are  willing 
to  pay  well  for  such  services.  Corporate  trust  business  has,  conse- 
quently, been  a  profitable  field  for  the  trust  companies. 


CHAPTER  VII 

INDIVIDUAL  TRUST  DEPARTMENT 
GENERAL  ORGANIZATION 

THE  cardinal  principle  of  the  trust  department  is  its  separation 
from  the  company's  own  affairs.  A  distinct  organization  is  there- 
fore maintained  for  the  conduct  of  trust  business,  the  capital  and 
surplus  of  the  company  supplying  a  guarantee  that  its  obligations 
in  a  fiduciary  capacity  will  be  properly  fulfilled.  Whatever  the  differ- 
ence in  organization,  functions,  or  management,  trust  companies  in 
every  part  of  the  country  unite  on  this  general  principle  of  not  mingling 
their  own  affairs  with  their  trust  accounts.  In  many  companies  the 
trust  department  occupies  entirely  separate  quarters,  and  has  no 
connection  with  the  banking  department  except  that  of  depositor. 
Expenses  and  earnings  are  separately  shown,  and  the  situation  re- 
solves itself  into  two  distinct  businesses  conducted  by  the  same  presi- 
dent and  directors  under  the  authority  of  a  single  charter. 

The  general  organization  of  the  trust  department  provides  for  the 
care  of  the  different  kinds  of  securities  which  are  held,  the  making 
of  investments,  the  receipt  and  disbursement  of  funds,  and  the  proper 
accounting  to  the  courts  and  the  parties  in  interest. 

In  a  small  or  newly  formed  company  the  entire  business  of  the 
individual  trust  department  is  usually  in  the  hands  of  a  few  employees 
who  attend  to  all  transactions  affecting  the  estates  in  their  control. 
As  the  department  grows,  however,  greater  specialization  becomes 
necessary,  and  in  the  largest  companies  separate  divisions  are  organ- 
ized for  each  part  of  the  business. 

The  plan  of  organization  should  always  be  one  which  permits  of 
expansion.  A  single  book  in  the  small  company  is  often  the  nucleus 
of  the  division  which  will  later  be  evolved. 

The  trust  records  should  conform  as  nearly  as  possible  to  the 
company's  general  system  of  bookkeeping.  A  frequent  statutory  re- 


THE  MODERN  TRUST  COMPANY 

quirement  is  that  trust  funds  and  investments  shall  be  kept  separate 
and  apart  from  the  assets  of  the  company,  and  that  all  investments 
made  in  a  fiduciary  capacity  shall  be  so  designated  as  to  show 
clearly  the  trust  or  estate  to  which  each  investment  belongs.  This 
is  a  matter  of  careful  record  and  description,  but  does  not  necessarily 
involve  the  actual  separation  of  the  securities  in  different  safe  deposit 
boxes  nor  of  the  accounts  in  a  series  of  bound  ledgers.  Still  less 
need  one  follow  the  example  of  a  recently  organized  trust  company 
where  the  bank  examiner  on  his  first  visit  asked  for  the  balance  of 
uninvested  trust  funds.  To  his  amazement  he  was  taken  to  the 
vault  and  shown  a  row  of  little  pasteboard  boxes  in  which  the  con- 
scientious trust  officer  was  keeping  the  uninvested  balances  in  cash, 
literally  "separate  and  apart,"  to  comply  with  the  provisions  of  law! 

APPOINTMENT 

The  capacity  in  which  the  individual  trust  department  acts  depends 
upon  the  nature  of  the  company's  appointment,  and  the  obligations 
assumed  vary  correspondingly.  Unlike  the  banking  and  safe  deposit 
departments,  which  stand  in  much  the  same  relation  to  all  their 
customers,  the  trust  department  plays  many  r61es  and  cares  for 
property  of  every  sort,  both  real  and  personal.  The  functions  of 
this  department  have  already  been  described.1  The  method  of 
appointment  and  subsequent  procedure  will  here  be  briefly  noted. 

When  a  client  wishes  to  name  the  trust  company  as  his  executor, 
it  is  customary  to  have  its  counsel  or  legal  officer  draw  the  will,  no 
charge  being  made  for  this  service  nor  for  the  safe-keeping  of  the 
document  during  the  life  of  the  testator.  Laymen  should  be  dis- 
suaded from  drawing  their  own  wills,  and  urged  always  to  secure 
legal  advice  so  that  errors  may  be  rectified  before  it  is  too  late.  If 
the  will  is  not  already  in  the  possession  of  the  executor  named  in  the 
document,  it  should  be  delivered  to  the  corporation  or  individual  so 
designated,  or  to  the  proper  officer  of  the  probate  court,  immediately  on 
the  death  of  the  testator.  Wills  are  often  left  in  safe  deposit  boxes 
or  in  the  hands  of  counsel.  If  a  decedent  or  a  decedent's  family  is 
represented  by  a  lawyer  who  brings  the  business  to  a  trust  com- 
pany, it  is  usual  for  the  company  to  retain  him  as  counsel  for  the 

i  See  p.  8. 


INDIVIDUAL   TRUST   DEPARTMENT  149 

estate.  When  the  testator's  personal  counsel  has  drawn  the  will,  his 
knowledge  of  the  testator's  private  affairs  is  likely  to  prove  of  value 
in  administering  the  estate.  The  first  duty  of  the  company  when 
named  as  executor  is  to  have  the  will  probated.  The  document  is 
deposited  with  the  register  of  wills,  or  officer  of  a  court  having  juris- 
diction in  the  matter  of  decedents'  estates,  known  in  different  states 
as  the  probate,  surrogate's,  or  orphans'  court.  After  the  will  is  proved, 
letters  testamentary,  constituting  the  executor's  authority  to  act,  are 
granted  and  the  appointment  is  advertised,  debtors  to  the  estate  being 
notified  that  payment  is  due,  and  all  persons  who  have  claims  against 
the  estate  being  called  upon  to  present  them  to  the  executor.  Trust 
companies  are  not  usually  required  to  give  bonds  to  secure  the 
faithful  performance  of  their  duties  whether  acting  as  executor,  ad- 
ministrator, or  trustee,  their  capital  and  surplus  being  considered  a 
sufficient  guarantee.  In  some  places  a  special  deposit  of  securities  is 
made  by  these  companies  with  the  state  authorities  as  an  additional 
guarantee.  One  or  more  individuals  are  often  named  as  co- executors 
with  a  trust  company.  In  such  cases  the  company  generally  takes 
charge  of  the  securities,  and  does  most  if  not  all  of  the  detail  work,  the 
other  executors  being  consulted  in  matters  of  judgment,  joining  in  the 
execution  of  documents  when  necessary,  and  sharing  the  commissions. 
Immediately  on  securing  possession  of  the  decedent's  property  an 
inventory  is  made,  and  usually  an  appraisement  of  the  personal  prop- 
erty. If  the  funds  are  sufficient,  the  executor  settles  the  debts  of  the 
estate  as  promptly  as  possible.  Some  debts  are  commonly  regarded 
by  the  law  as  preferred,  —  as  funeral  expenses,  bills  for  physician's 
services  rendered  during  the  decedent's  last  illness,  —  and  these, 
where  there  are  sufficient  funds,  are  paid  at  once.  In  the  case  of 
other  debts  and  claims  it  is  not  unusual  for  the  executor  to  wait  until 
the  statutory  period  has  elapsed  during  which  claims  may  be  pre- 
sented, in  order  that  all  possible  claimants  may  be  protected.  When 
necessary  the  executor  sells  securities  or  other  personal  property  in 
order  to  obtain  the  requisite  cash.  Collateral  inheritance  and  other 
taxes  are  paid  as  promptly  as  practicable  to  secure  the  advantage  of 
any  discounts  allowable  and  to  avoid  the  penalties  imposed  for 
delay.  The  payment  of  legacies  follows,  in  conformity  with  the 
provisions  of  the  will.  To  be  properly  protected  the  executor  should, 
as  a  rule,  defer  the  payment  of  legacies  until  such  time  as  an  account 


150  THE   MODERN   TRUST  COMPANY 

may  be  filed  and  adjudicated  by  the  proper  court.  Certificates  of 
the  appointment  of  the  executor,  obtained  from  the  proper  official 
or  probate  court,  are  used  as  evidence  of  authority  to  perform  all 
acts  necessary  in  the  settlement  of  the  estate.  At  the  proper  time, 
usually  one  year  after  the  will  is  proved,  the  executor  files  an  account 
for  audit  by  the  probate  court.  After  audit  the  adjudication  of  the 
court  is  set  forth  in  a  decree  passing  upon  the  acts  performed  and 
directing  such  further  acts  as  may  be  necessary  on  the  part  of  the 
executor.  The  executor  may  account  once  or  more  often,  according 
to  the  nature  of  the  estate  and  the  requirements  of  the  beneficiaries 
and  creditors.  After  settlement  of  the  final  account  the  executor, 
upon  distribution  of  the  balances  remaining  in  his  hands  and  pay- 
ment of  the  court  costs,  is  discharged  and  relieved  from  further 
responsibility. 

The  formal  duties  of  an  administrator  are  almost  identical  with 
those  of  an  executor.  The  power  of  appointment  vests  in  the  register 
of  wills  or  official  of  the  court  having  jurisdiction  in  the  matter,  in  a 
manner  which  is  usually  prescribed  by  statute.  When  an  individual 
dies  intestate,  or  leaves  a  will  in  which  no  executor  is  named,  or  when 
an  executor  declines  to  act,  or  dies  before  completing  his  duties  as 
such,  an  administrator  is  appointed  to  settle  the  estate.  If  there 
is  a  will,  the  property  is  divided  according  to  its  provisions ;  otherwise 
the  order  of  inheritance  is  fixed  by  the  intestate  laws  of  the  state, 
succession  being  based  on  relationship  to  the  decedent,  the  wife  and 
children  having  first  right  to  the  estate.  The  statutes  of  the  various 
states  differ  in  minor  particulars,  but  the  general  procedure  in  ad- 
ministering estates  is  very  similar.  After  appointment  the  adminis- 
trator qualifies,  and,  if  an  individual,  gives  bonds  for  the  faithful 
performance  of  his  duties.  The  administrator  at  once  takes  charge 
of  the  estate,  and  proceeds  to  administer  it  as  in  the  case  of  an  execu- 
torship,  calling  by  advertisement  for  the  presentation  of  claims,  filing 
an  inventory  and  appraisement,  selling  securities  when  necessary, 
paying  debts,  taxes,  and  legacies,  and  accounting  to  the  court.  The 
final  distribution  of  the  estate  follows,  with  the  discharge  of  the 
administrator  on  the  satisfactory  completion  of  his  duties. 

Appointment  as  trustee  originates  in  various  ways.  When  trusts 
are  made  under  a  will,  the  property  is  received  from  the  executor  on 
the  settlement  of  the  estate,  and  is  held  in  accordance  with  the  terms 


INDIVIDUAL  TRUST  DEPARTMENT  151 

of  the  will  for  such  purposes  as  it  designates.  The  same  corporation 
or  individual  is  frequently,  though  not  necessarily,  named  as  executor 
and  testamentary  trustee,  and  in  this  case  the  property  is  first  held 
in  the  former  capacity  and  vests  in  the  trustee  on  settlement  of  his 
account  as  executor.  "  The  precise  moment  when  his  duties  as  an 
executor  come  to  an  end,  and  his  duties  as  a  trustee  begin,  is  hard  to 
ascertain.  .  .  .  The  late  Sir  John  Wickens,  a  very  nice  observer, 
used  to  tell  his  pupils  that  it  invariably  took  place  in  the  dead  hours 
of  the  night,  but  so  close  an  investigation  is  to  be  deprecated."  1 
When  no  appointment  is  made  by  will  or  the  trustee  named  does  not 
or  cannot  act,  and  the  will  makes  no  provision  for  appointing  a  sub- 
stitute, the  court  having  jurisdiction  will  usually  fill  the  vacancy  on 
the  application  of  those  interested.  All  trusts  under  will  are  subject 
to  the  jurisdiction  of  the  proper  court,  to  which  accounting  is  made 
from  time  to  time  during  the  life  of  the  trust  or  at  all  events  upon  its 
termination.  The  title  to  real  estate  vests  in  the  trustee  directly  under 
the  provisions  of  the  will;  that  to  personal  property,  on  its  transfer 
by  the  executor  to  the  trustee.  When  there  are  several  trustees,  their 
authority  must  usually,  unless  the  instrument  creating  the  trust  pro- 
vides otherwise,  be  exercised  jointly,  unlike  that  of  co-executors,  each 
one  of  whom  is  vested  with  full  powers  and  is  competent  to  act  inde- 
pendently. Individual  trustees  appointed  by  the  courts  must,  as  a  rule, 
give  bonds,  which  are  not  required  of  corporate  trustees.  The  two 
interests  in  the  trust  estate  are  those  of  the  trustee  in  whom  the  title  to 
the  property  vests,  and  of  the  beneficiary  for  whom  the  trust  is  created, 
and  who  can  compel  the  trustee  to  carry  out  its  provisions.  When 
appointment  is  made  by  deed,  the  trustee  is  governed  by  the  terms  of 
the  agreement  between  the  maker  of  the  trust  and  itself.  Such  trust 
deeds  may  have  all  sorts  of  objects  —  from  the  wish  to  be  relieved  of 
responsibility  in  the  care  of  property,  to  the  making  of  a  marriage 
settlement,  or  the  setting  aside  of  funds  for  charity  or  for  support  of 
those  incompetent  to  manage  their  own  affairs.  Trusts  under  deed 
may  be  irrevocable  or  may  contain  a  clause  making  them  subject 
to  amendment  or  termination  at  pleasure.  They  may  be  made  for 
definite  periods  or  to  terminate  on  the  occurrence  of  some  event  such 
as  the  death  of  a  beneficiary.  In  the  United  States,  except  in  the  case 
of  trusts  for  charities,  trusts  in  perpetuity  are  prohibited  by  law. 

1  "The  Duties  and  Liabilities  of  Trustees,"  Augustine  Birrell,  p.  13. 


152  THE   MODERN   TRUST  COMPANY 

The  liabilities  of  a  guardian  are  very  similar  to  those  assumed  in 
the  exercise  of  the  powers  already  described.  A  trust  company  may 
be  guardian  of  the  person  or  estate  of  the  minor,  or  of  both.  The 
guardian  may  be  appointed  by  will,  by  deed,  or  by  the  court.  The 
guardianship  terminates  on  the  ward's  becoming  of  age.  The  princi- 
pal duties  of  a  guardian  of  the  estate  are  to  make  an  inventory  of  the 
property  of  the  ward,  make  investments  according  to  law,  keep 
accurate  records  of  all  receipts  and  disbursements,  —  if  necessary 
obtaining  instructions  from  the  court  as  to  the  provisions  it  shall 
make  for  the  education  and  support  of  the  minor, — and  on  the  latter 's 
coming  of  age  to  render  a  final  account  for  audit  and  approval,  and 
to  deliver  the  ward's  estate  in  accordance  with  the  decree  of  court. 

The  offices  of  curator,  committee,  and  conservator  are  much 
like  that  of  guardian.  The  life  of  the  trust  varies  according  to  the 
circumstances  of  each  case.  Thus  a  trust  for  a  person  of  unsound 
mind  ends  on  the  beneficiary's  regaining  his  reason. 

When  the  trust  company  acts  as  agent  and  attorney,  the  title  to 
the  property  held  or  managed  does  not  vest  in  it  as  in  a  trustee.  Its 
appointment  is  derived  from  a  simple  request  or  agreement  to  perform 
certain  definite  acts.  This  authority,  which  can  be  revoked  at  any 
time,  may  be  in  the  form  of  a  letter  or  a  general  or  special  power  of 
attorney.  Under  a  general  power  of  attorney,  authority  is  given 
to  manage  real  estate,  collect  rents  and  other  income  and  principal 
moneys,  buy  and  sell  securities,  indorse  checks,  vote  at  meetings 
of  corporations,  sue  and  be  sued  —  in  short,  to  act  generally  on 
behalf  of  the  principal  or  person  represented.  A  special  power  is 
limited  to  a  particular  act  or  acts.  If  the  power  of  attorney  is  to  be 
recorded,  —  as  a  power  to  sell  real  estate  or  to  satisfy  a  mortgage,  — 
or  if  certified  copies  are  likely  to  be  needed,  it  must  be  properly 
acknowledged  in  accordance  with  the  requirements  of  the  recording 
statutes. 

As  assignee  a  trust  company  usually  acts  under  appointment 
made  by  a  debtor  who  by  such  action  vacates  the  title  to  his  property 
for  the  benefit  of  his  creditors.  The  authority  to  act  as  receiver  is 
derived  from  the  court  to  which  application  has  been  made  by  a 
debtor,  or  by  creditors  because  of  an  embarrassed  condition  of  the 
debtor's  affairs.  In  both  cases  the  duty  of  the  trust  company  is  to 
take  charge  of  and  manage  the  property  in  the  interest  of  the  creditors ; 


INDIVIDUAL  TRUST  DEPARTMENT  153 

in  the  case  of  a  business  it  must  carry  it  on  until  its  difficulties  are 
tided  over,  or  else  wind  up  its  affairs. 

An  escrow  may  be  denned  as  an  instrument  under  seal  placed 
in  the  hands  of  a  third  person,  to  be  delivered  to  the  grantee  upon 
the  happening  of  certain  conditions,  upon  which  final  delivery  only 
the  transmission  of  title  is  complete.  As  custodian  or  depositary  the 
trust  company  accepts  escrows,  taking  its  authority  in  the  form  of 
written  instructions  in  which  all  the  parties  in  interest  join.  No 
responsibility  is  assumed  beyond  the  care  of  the  deed  or  instrument 
held,  and  its  delivery  in  accordance  with  the  instructions  received. 

CARE  OF  STOCKS  AND   BONDS 

Upon  the  trust  officer  devolves  the  charge  of  all  securities  taken 
for  trust  accounts.  For  every  item  received  he,  or  an  assistant  to 
whom  he  has  delegated  sufficient  authority,  should  give  a  receipt 
describing  both  the  security  and  the  terms  under  which  it  is  to  be 
held. 

When  the  title  to  stocks  and  registered  bonds  vests  in  the  trust 
company  in  some  fiduciary  capacity,  they  should  be  promptly  trans- 
ferred, if  this  has  not  been  done  before  they  are  received.  Some- 
times the  securities  of  an  estate  have  been  allowed  to  remain  in  the 
name  of  deceased  relatives  or  other  persons  from  whom  they  have  been 
received  or  inherited,  and  if  the  legal  representatives  of  the  original 
owner  have  also  died,  transfers  cannot  be  made  until  new  letters  of 
administration  have  been  taken  out.  All  such  tangles  should  be 
straightened  out  while  the  facts  of  the  case  are  fresh,  and  before 
there  can  be  any  danger  of  loss  through  inability  to  make  a  transfer. 

The  record  of  individual  trusts  should  give  the  exact  wording  to 
be  used  in  registration,  and  care  should  be  taken  that  all  securities  of 
the  same  estate  are  registered  alike.  After  all  necessary  transfers 
have  been  made,  and  the  stocks  and  bonds  have  been  properly  entered 
in  the  record  of  trust  securities  received  and  the  record  of  individual 
trusts,  they  are  ready  to  be  indexed  and  put  away  in  the  vault. 

The  question  of  the  care  of,  and  access  to,  trust  securities  is  one 
which  confronts  the  management  of  every  trust  company  and  has 
been  solved  in  many  ways,  from  the  extreme  of  carelessness  where 
no  one  is  responsible  and  the  keys  are  freely  handed  about,  to  the 


154  THE   MODERN  TRUST   COMPANY 

extreme  of  caution  thus  impressively  stated:  "The  securities  of 
each  trust  are  kept  separately  in  safe  deposit  boxes  to  which  access 
may  be  had  only  by  an  assistant  secretary  accompanied  by  a  vice- 
president,  or  by  two  vice-presidents,  and  no  securities  may  be  taken 
from  the  boxes  except  on  a  requisition  of  the  trust  department  ap- 
proved by  a  vice-president."  The  ideal  is  to  get  the  greatest  possible 
degree  of  safety  with  the  least  possible  amount  of  red  tape.  The 
client  likes  to  know  that  his  securities  are  absolutely  safe,  but  he  also 
likes  to  know  that  they  can  be  quickly  found  and  taken  out  when 
needed,  and  if  he  realizes  that  both  the  capital  and  surplus  of  the  com- 
pany are  liable  for  loss  occasioned  by  the  negligence  of  its  employees, 
he  will  be  quite  as  much  impressed  by  simple  and  accurate  methods 
as  by  a  ponderous  system  which  breaks  down  in  an  emergency. 

In  a  small  business  where  other  safeguards  are  not  practicable, 
joint  access  to  the  securities  by  two  officers  is  usually  advisable; 
but  whenever  the  size  of  the  company  will  warrant  it,  one  officer 
should  be  put  in  charge  of  the  trust  securities,  and  be  held  per- 
sonally responsible  for  their  receipt,  care,  and  disposition.  He 
should  be  subordinate  to  the  head  of  the  trust  department  and 
should  be  appointed  only  after  his  fitness  has  been  thoroughly 
proved.  Independent  records  kept  in  the  trust  department  form 
the  basis  for  examination  of  his  work.  An  adequate  salary  paid  to 
such  an  officer  removes  a  fruitful  source  of  temptation  and  is  money 
well  invested.  The  sum  for  which  he  is  bonded  in  a  surety  company, 
although  probably  insignificant  compared  with  the  total  value  of  the 
securities  in  his  care,  should  approximate  the  amount  which  he  could 
readily  dispose  of  in  case  of  dishonesty.  This  officer  should  have  no 
authority  to  execute  transfers  of  securities  on  behalf  of  the  company, 
examinations  should  be  made  at  frequent  intervals  and  without  notice, 
and  in  his  absence  or  disability  his  duties  should  devolve  on  a  fellow- 
officer  designated  for  the  purpose.  The  board  of  directors  should 
decide  to  which  officers  or  other  employees  he  may  deliver  securities, 
and  in  no  case  should  he  be  permitted  to  make  deliveries  to  any 
other  individuals,  whether  in  the  employ  of  the  company  or  not, 
unless  so  directed  in  writing  by  one  of  those  authorized  to  make  such 
requisition.  The  giving  and  taking  of  receipts  should,  without  ex- 
ception, be  insisted  on.  This  officer  can  take  charge  of  cutting  and 
collecting  coupons,  and  can  also  watch  for  bond  calls,  and  keep  in 


INDIVIDUAL  TRUST  DEPARTMENT  155 

touch  with  the  values  of  the  securities  which  pass  through  his  hands. 
The  position  is  one  of  great  responsibility  and  of  considerable  interest, 
for  although  it  does  not  bring  the  holder  into  relation  with  the  outside 
public,  it  gives  him  a  knowledge  of  securities  and  forms  an  excellent 
basis  for  future  advancement.  Even  in  a  trust  company,  somebody 
must  finally  be  trusted,  and  whether  the  business  be  large  or  small, 
the  directors  should  see  to  it  that  an  adequate  and  adaptable  system 
is  introduced,  embodying  the  separation  of  the  care  of  records  and 
securities  and  the  principle  of  personal  responsibility. 

In  the  absence  of  the  officer  in  charge  of  the  trust  securities, 
joint  access  should  be  required  on  the  part  of  two  other  officers,  one 
of  whom  keeps  a  record  of  the  securities  which  are  removed  in  his 
presence,  while  the  other  takes  a  receipt  on  their  delivery.  Later  the 
officer  responsible  for  the  vault  compares  the  receipts  with  the  list. 
He  holds  a  master  key  to  the  vault,  while  the  two  officers  who  act 
in  his  absence  hold  keys  which  must  both  be  used  to  open  the  lock, 
thus  preventing  access  by  either  one  alone. 

INDEX  OF   SECURITIES 

A  complete  record  of  all  securities  held  for  trust  accounts  is 
kept  in  a  card  index.  The  main  divisions  of  the  index  are:  cou- 
pon bonds,  stocks,  registered  loans,  and  miscellaneous  securities. 


DIVIDENDS) 

)        PAYABLE 
REST  J 


PAft  VAlj 

TOTAL  SHARES OF  SHARES  / 


TOTAL  BONDS  ft 


PRINCIPAL  DUE 


ATENTED  MAY  J5.1897.  '       "LIBRARY   BUHtAU 


INDEX  OF  SECURITIES  —  BLUE  CARD 


1 56 


THE  MODERN  TRUST  COMPANY 


Under  these  divisions  blue  cards  describing  the  security  are  arranged 
alphabetically,  and  behind  each  blue  card  is  a  series  of  white  cards 
showing  the  separate  holdings  arranged  alphabetically  as  to  the  name 
of  the  trust. 


INDEX  OF  SECURITIES— WHITE  CARD 


The  blue  cards  have  projecting  tabs  which  are  cut  in  eight  positions 
to  show  the  various  interest  and  dividend  periods.  Commencing  at 
the  left  they  are  as  follows :  — 


"J.  &  J."  for  January  and  July 
11 F.  &  A."  for  February  and  August 
"  M.  &  S."  for  March  and  September 
«  A.  &  O."  for  April  and  October 


«  M.  &  N."  for  May  and  November 
"  J.  &  D."  for  June  and  December 
"  Irreg."  for  Irregular 
Blank  for  non-interest  and  non-divi- 
dend-paying securities 


When  coupons,  interest,  or  dividends  are  payable  quarterly,  two  blue 
cards  are  used.  The  card  with  a  tab  showing  the  earliest  calendar 
month  in  which  interest  is  paid  comes  first,  and  is  followed  by  another 
indicating  the  later  interest  or  dividend  period. 

In  the  coupon  bond  section  the  blue  card  gives  the  title  of  the' 
security,  the  interest  periods,  date  of  maturity,  provisions  as  to  re- 
demption, and  other  information  if  needed.  The  aggregate  par  value 
of  all  the  individual  holdings  may  also  be  noted  in  pencil  on  the  blue 
card.  On  the  white  cards  which  follow,  the  top  line  is  used  for  the 
title  of  the  security,  much  abbreviated,  and  the  first  letters  of  the 


INDIVIDUAL  TRUST  DEPARTMENT  157 

months  when  interest  is  paid.  On  the  second  line  appear  the  number 
and  name  of  the  account  and  the  par  value  of  its  holding. 

The  same  blue  cards  are  used  for  coupon  bonds,  stocks,  and 
registered  loans. 

In  the  case  of  stocks,  the  title  of  the  company,  the  par  value  of 
the  shares,  the  dividend  periods,  how  collected,  and  the  total  of  the 
various  holdings,  are  written  on  the  blue  cards.  The  back  of  the 
blue  card  is  ruled  for  a  record  of  the  date  and  rate  of  dividends,  and 
the  way  in  which  they  are  collected.  The  card  is  ruled  in  four  sets 
of  two  vertical  columns.  In  each  set  one  column  is  for  the  date,  and 
the  other  for  the  amount  or  rate  of  each  dividend  payment.  Ten 
horizontal  lines  would  give  space  for  forty  dividend  periods.  A 
diagonal  line  across  each  space,  or  eight  sets  of  vertical  columns 
instead  of  four,  would  double  the  capacity  of  the  card.  The  white 
cards  show  the  number  of  shares  held  by  each  trust. 

With  registered  bonds,  the  title  of  the  security,  the  interest  periods, 
date  of  maturity,  provisions  as  to  redemption,  and  total  amount 
held,  are  noted  on  the  blue  card  as  in  the  case  of  coupon  bonds.  On 
the  back  of  the  card  the  date  and  rate  of  interest  payments  are  shown, 
and  the  method  of  their  collection,  exactly  as  in  the  record  of  stock 
dividends.  The  white  cards  give  the  par  value  of  each  estate's 
holding. 

The  miscellaneous  securities  section  is  an  exception  to  the  others 
in  that  it  is  arranged  alphabetically  according  to  the  name  of  the 
account.  The  white  cards  only  are  used,  headed  by  the  number  and 
name  of  the  trust,  while  the  rest  of  the  card  is  given  up  to  a  descrip- 
tion of  the  various  items.  Among  these  will  be  found  notes,  due  bills, 
judgments,  life  insurance  policies,  jewellery,  membership  certificates, 
deeds  for  pews,  and  a  miscellaneous  assortment  of  evidences  of  past, 
present,  or  future  value,  which  cannot  be  classified  in  any  other  way. 

Securities  of  no  value  are  recorded  on  buff  cards  of  the  same 
ruling  as  the  white  cards.  The  worthless  securities  themselves  can 
for  convenience  be  kept  separately,  so  as  to  save  time  and  labor  at 
audits  and  in  the  transaction  of  current  business.  The  record 
should,  however,  be  kept  in  its  proper  place  in  the  index,  irrespective 
of  the  question  of  value.  The  color  of  the  card  at  once  indicates 
both  the  location  and  the  character  of  the  security. 

Whenever  a  security  is  withdrawn  from  the  vault,  a  receipt  is 


158 


THE  MODERN  TRUST  COMPANY 


taken.  The  receipt  card  shows  the  purpose  for  which  withdrawn, 
the  date,  description  and  par  value  of  the  security,  the  number  and 
name  of  the  account  to  which  it  belongs,  and  the  signature  of  the 
person  to  whom  it  was  delivered.  These  cards  are  filed  together  in 


With  drawn  from  the  vault 

Date 

Shares 

Bonds 

Description 

Par  Value 

Trust^No                                                         S~>L  Received  by 

\^s 

the  index  case,  alphabetically,  according  to  the  title  of  the  security. 
When  all  the  securities  of  an  account  or  a  large  number  of  them  are 
withdrawn,  it  may,  however,  be  easier  to  put  several  items  on  one 
card,  and  these  receipts  may  be  arranged  according  to  the  names  of 
the  trusts,  in  front  of  the  others  in  the  receipt  index.  At  the  time  the 
receipt  card  is  placed  in  the  index,  the  card  representing  the  holding 
of  the  account  from  which  the  securities  have  been  taken  is  marked 
"out."  If  only  part  of  the  holding  has  been  withdrawn,  the  amount 
taken  is  also  noted  in  pencil.  Thus  the  general  index  shows  at  all 
times  what  securities,  for  which  the  company  is  still  liable,  are  in 
process  of  sale  or  for  other  reasons  are  out  of  the  vault.  When 
securities  which  have  been  withdrawn  temporarily  are  returned,  the 
receipt  card  is  destroyed  and  the  word  "out"  is  erased  from  the 
index  card.  These  appear  as  "returns"  in  the  record  of  trust  securi- 
ties received.  When  securities  have  been  sold  or  delivered,  and  the 
proper  entries  have  been  made  in  the  trust  ledger,  the  receipt  card 
and  the  corresponding  card  in  the  securities  index  are  destroyed,  or 
if  only  part  of  the  holding  has  been  disposed  of,  the  amount  is 


INDIVIDUAL  TRUST  DEPARTMENT  159 

deducted  and  the  balance  shown  on  the  security  card.    The  securi- 
ties delivered  book  is  the  authority  for  these  entries.1 

A  maturity  index  is  also  kept,  in  which  cards  bearing  the  title 
and  date  of  maturity  of  each  bond  issue  are  arranged  chronologically. 
At  the  front  of  the  index  are  cards  representing  overdue  securities, 
then  the  securities  falling  due  during  the  next  twelve  months,  sepa- 
rated by  guide  cards.  As  each  month  passes,  the  guide  card  is 
moved  back  to  the  corresponding  month  of  the  following  year.  In 
this  way  the  securities  falling  due  at  any  time  within  a  year  are 
easily  found.  The  total  holdings  of  all  securities  maturing  within 
six  months  are  shown  on  the  maturity  index,  so  that  new  invest- 
ments may  be  secured  in  good  time  or  extension  provisions  be  taken 
advantage  of.  The  individual  holdings  are  found  by  reference  to 
the  index  of  securities. 


ARRANGEMENT  OF   SECURITIES  IN  VAULT 

Many  companies  keep  the  securities  of  each  estate  in  separate 
locked  safe  deposit  boxes,  or  in  boxes  or  envelopes  in  a  special  vault. 
An  equally  safe  but  less  cumbersome  system  is  based  on  the  plan  of 
keeping  all  securities  flat  in  portfolios,  and  the  holdings  of  each  trust 
account  distinctly  marked  with  its  number  and  name.  The  stocks, 
registered  loans,  and  miscellaneous  items  belonging  to  each  trust 
are  kept  together,  as  all  the  securities  of  one  trust  are  more  often 
wanted  than  are  all  the  holdings  of  one  security.  The  coupon  bonds, 
on  the  other  hand,  are  arranged  primarily  as  to  interest  periods,  and 
then  as  to  security  and  trust  account  because  all  the  holdings  of  each 
issue  have  to  be  taken  out  at  least  twice  a  year  for  the  purpose  of 
cutting  coupons. 

The  stocks,  miscellaneous  securities,  and  registered  loans  are  kept 
in  portfolios  made  of  two  sheets  of  tar  board,  each  12%"  x  19". 
The  estates  are  arranged  in  numerical  order,  each  one  separated 
from  the  next  by  a  loose  manila  sheet  12"  x  i8J",  at  the  lower  right- 
hand  corner  of  which  is  the  number  and  name  of  the  account.  The 
registration  of  stocks  and  loans  shows  the  ownership  of  each  security, 
and  in  addition  the  trust  number  is  written  in  ink  in  the  upper 
right-hand  corner  of  each  certificate.  In  each  account,  each  class 

*  See  p.  189. 


160  THE  MODERN  TRUST  COMPANY 

of  securities  is  arranged  alphabetically,  first  stocks,  then  miscellaneous 
securities,  then  registered  bonds.  One  portfolio  usually  holds  a  num- 
ber of  trusts,  although  a  very  large  estate  may  need  several  port- 
folios. The  portfolios  are  held  together  by  loose  straps  of  webbing 
with  ordinary  buckles.  So  as  to  be  readily  accessible,  they  are  kept 
on  separate  steel  shelves  2j"  apart.  A  label  on  the  outside  of  the 
closet  door  gives  the  numbers  of  the  trusts  within,  and  on  the  inside  of 
the  door  is  another  label  showing  the  numbers  of  the  trust  accounts 
contained  in  each  portfolio. 

Securities  of  no  value  are  kept  in  a  separate  set  of  portfolios, 
the  arrangement  being  identical  with  that  just  described  except  that 
worthless  coupon  bonds  are  kept  with  the  other  "bad"  securities.  As 
apparently  worthless  securities  occasionally  develop  unexpected  value, 
it  is  necessary  to  preserve  the  certificates,  and  keep  accurate  records 
of  them.  For  instance,  a  few  years  ago  when  the  electric  railway  was 
introduced,  many  worthless  turnpike  stocks  became  suddenly  valu- 
able because  the  electric  railway  companies,  not  possessing  the  right 
of  eminent  domain  like  the  railroads,  were  obliged  in  many  instances 
to  purchase  from  the  turnpike  companies  the  rights  of  way  still  owned 
by  these  old  corporations. 

The  arrangement  of  the  coupon  bonds  in  the  vault  is  first  as 
to  interest  periods.  On  account  of  the  different  sizes  of  shelf  and 
portfolio  that  are  needed,  each  interest  period  is  subdivided  into  flat 
and  book  bonds.  Under  these  subdivisions  the  bonds  are  arranged 
alphabetically  by  the  name  of  the  security.  Flat  bonds  have  bond 
and  coupons  printed  or  engraved  on  the  same  large  sheet.  In  book 
bonds  the  bond  and  the  coupons  are  on  separate  smaller  sheets  bound 
together. 

All  coupon  bonds  are  spread  out  in  portfolios  of  loose  tar  boards 
with  manila  sheets  to  separate  the  various  issues.  For  flat  bonds 
the  tar  boards  are  19"  x  28"  and  the  manila  sheets  18"  x  27".  The 
portfolios  are  large,  and  it  is  convenient  to  have  holes  punched  at  one 
edge  of  the  tar  boards  and  manila  sheets,  and  the  sheets  eyeleted, 
so  that  a  tape  or  cord  may  be  used  as  a  back  to  hold  the  papers  in 
position  when  the  leaves  are  turned.  Straps  of  webbing  hold  each 
portfolio  together.  Each  manila  sheet  is  numbered  consecutively, 
and  on  the  outside  of  the  portfolio  is  pasted  an  alphabetical  list  of 
the  securities,  showing  the  number  of  the  sheet  on  which  the  bonds 


INDIVIDUAL  TRUST  DEPARTMENT  l6l 

will  be  found.  All  the  coupon  bonds  of  the  same  issue  are  together 
and  are  arranged  in  order  of  trust  numbers,  the  estate  with  the 
lowest  number  being  on  the  top  of  the  pile.  As  no  writing  is  allowed 
on  coupon  bonds,  the  ownership  is  indicated  by  a  small  label  gummed 
at  the  upper  edge  and  attached  to  one  corner  of  the  back  of  the  bond. 

COUPON  BOND  LABEL 


TRUST  No. 

* 

BONDS  OF 

OWNER 

JANUARY  &  JULY 

The  label  gives  the  name  of  the  security,  number  of  bonds,  par  value, 
interest  period,  and  number  and  name  of  the  trust.  If  a  trust 
account  owns  more  than  one  bond  of  a  kind,  the  label  is  attached  to 
the  uppermost  bond,  and  the  others  have  the  number  of  the  trust 
pencilled  at  the  same  point  on  the  margin.  Each  bond  is  recorded 
by  its  number  in  the  record  of  individual  trusts,  and  thus  a  perfect 
system  of  identification  of  ownership  is  established.  Book  coupon 
bonds  are  cared  for  exactly  like  the  flat  bonds,  except  that  the  size 
of  the  tar  boards  is  io|"  x  15^",  and  of  the  manila  sheets  10"  x  14^". 
To  make  the  portfolios  of  uniform  shape,  the  bonds  are  piled,  some 
with  their  bindings  turned  to  one  end  of  the  portfolio  and  some  to  the 
other.  Owing  to  the  size  and  weight  of  the  portfolios,  each  one 
should  be  kept  on  a  roller  shelf.  The  shelves  should  be  4^"  apart 
for  flat  portfolios  and  6"  apart  for  the  book  portfolios.  On  the 
outside  of  each  closet  door  is  a  label  showing  the  interest  period  of 
the  bonds,  and  whether  flat  or  book.  Inside  the  door,  a  label  gives 
the  alphabetical  divisions  contained  in  each  portfolio.  As  a  help 
in  finding  coupon  bonds  it  may  be  convenient  to  keep  in  the  vault 
a  small  card  index  arranged  alphabetically  under  the  names  of  the 
securities,  showing  to  which  interest  periods  they  belong  and  whether 
they  are  flat  or  book  bonds. 

The  arrangement  which  has  been  described,  although  a  departure 
from  the  traditional  method,  has  been  proved  by  experience  to  be 
thoroughly  satisfactory.  The  portfolios  lend  themselves  readily  to 


THE  MODERN  TRUST  COMPANY 

expansion  or  contraction,  and  even  when  readjustments  have  to  be 
made,  owing  to  the  receipt  of  large  numbers  of  new  securities  or  the 
delivery  of  old  ones,  the  process  is  a  simple  one.  No  more  space 
is  needed,  sometimes  even  less,  than  under  the  old-fashioned  systems. 
A  security  is  always  quickly  and  easily  found  because  there  is  only 
one  place  in  the  vault  where  it  can  belong,  and  the  papers  are  kept 
in  far  better  condition  than  when  folded.  In  the  cutting  of  coupons 
alone,  an  immense  amount  of  time  and  trouble  is  saved  if  the  bonds 
do  not  have  to  be  unfolded  or  unrolled.  Examination  of  assets  is 
also  greatly  facilitated.  The  system  can  be  adapted  to  the  needs 
of  the  smallest  as  well  as  of  the  largest  company. 

COLLECTION   OF   INTEREST  AND   DIVIDENDS 

The  index  of  securities  is  the  record  from  which  data  are  pro- 
cured for  the  collection  and  credit  of  interest  receipts. 

Coupons  are  promises  to  pay  to  the  bearer  on  a  given  date  a 
specified  sum  representing  the  amount  of  interest  then  due  on  the 
bonds  to  which  they  are  attached.  Coupon  bonds  can  generally  be 
registered  as  to  principal  if  the  owner  so  desires,  and  occasionally 
the  coupons  are  payable  only  to  the  order  of  the  registered  owner  of 
the  bond. 

As  a  preliminary  to  the  cutting  of  coupons,  a  coupon  collection 
list  is  each  month  made  up  from  the  index  of  coupon  bonds.  Using 
the  tabs  of  the  blue  cards  as  a  guide,  an  alphabetical  list  is  prepared 
of  the  name  and  total  holding  of  each  security  whose  coupons  will  fall 
due  at  the  next  interest  period.  On  the  same  sheet,  spaces  are  pro- 
vided in  which  to  record  the  number  of  coupons,  amount  of  each, 
deductions  for  taxes,  net  amount,  where  and  when  payable,  date  of 
payment,  and  remarks.  The  list  is  turned  over  to  the  person  whose 
duty  it  is  to  cut  the  coupons,  and  all  the  other  entries,  excepting  the 
date  of  payment,  are  made  as  the  coupons  are  cut.  In  cutting  cou- 
pons, the  fewer  who  take  part  the  better,  and  if  the  officer  in  charge 
of  the  vault  cuts  them  all  himself,  the  necessity  of  verifying  the  se- 
curities as  they  are  returned  to  the  vault  is  obviated  and  there  is  also 
less  danger  of  coupons  being  mutilated  and  payment  refused.  A 
steel  coupon  cutter  is  used,  having  two  sides  at  right  angles,  each 
about  4^"  long  and  i^"  wide.  At  the  point  of  the  right  angle  is  a 


163 


164  THE  MODERN  TRUST  COMPANY 

raised  knob  by  which  the  cutter  is  firmly  held  in  the  left  hand,  its 
inside  sharpened  edges  at  the  outer  margin  of  the  coupon,  while  the 
coupon  is  detached  by  a  quick  pull  of  the  right  hand.  Only  one  cou- 
pon should  be  cut  at  a  time,  as  bonds  are  not  always  evenly  trimmed, 
and  coupons  of  the  same  date  may  not  lie  exactly  under  each  other. 
As  soon  as  the  coupons  are  cut,  they  are  counted  and  bundled  in  pack- 
ages of  not  more  than  one  hundred  each,  and  the  number  is  written 
in  pencil  on  each  package.  They  are  then  placed  in  envelopes  on 
which  are  indorsed  the  name,  number  and  amount  of  the  coupons, 
the  date  and  place  of  payment,  and  the  name  of  the  depositing  trust 
company.  About  ten  days  before  the  maturity  of  the  coupons  they 
are  deposited  in  bank  for  collection.  The  collecting  agency  may  be 
the  banking  department  of  the  trust  company,  or  another  bank. 
According  to  local  usage,  the  envelopes  may  be  passed  through  the 
collecting  agency  either  sealed  or  open. 

For  coupons  payable  at  local  offices  and  collected  by  messengers, 
linen-lined  envelopes  3^"  x  6J"  can  be  used  again  and  again.  In 
this  case  the  title,  interest  period,  and  place  of  payment  are  written 
in  ink,  the  number,  value  of  each  coupon,  and  total  amount  are 
shown  in  pencil,  so  that  the  figures  can  be  changed  at  successive 
interest  periods. 

At  the  same  time  that  the  coupon  collection  sheet  is  prepared, 
credit  slips  are  written  up  from  the  index  of  coupon  bonds.  These 
give  the  title  of  the  security  at  the  top  of  the  slip  and  below  an  alpha- 
betical list  of  estates,  the  par  value  of  each  holding,  and  the  amount 
of  the  coupons  due  to  each.  A  convenient  size  for  such  a  credit  slip 
is  6"  x  12".  As  the  slips  can  be  corrected  and  used  at  successive 
interest  periods,  space  should  be  left  for  new  accounts. 

The  totals  of  each  credit  slip  must  correspond  with  the  par  value 
of  principal  and  net  amount  of  the  coupons  as  shown  by  the  corre- 
sponding item  of  the  collection  sheet. 

As  each  item  is  reported  paid,  the  date  of  payment  is  recorded  on 
the  collection  sheet,  the  cash  or  due  bill  received  from  the  banking 
department  is  handed  to  the  trust  department  receiving  teller,  and  he 
passes  the  credit  slip  to  the  bookkeepers  in  order  to  distribute  the 
proceeds  of  the  coupons  to  the  proper  accounts.  As  a  matter  of  con- 
venience it  is  well  to  have  a  coupon  credit  book  ruled  in  the  same  way 
as  the  credit  slips,  and  to  show  in  it  the  total  amount  credited,  refer- 


INDIVIDUAL  TRUST  DEPARTMENT  165 

ring  to  the  slips  for  the  individual  items.  When  a  single  item  is 
credited,  or  when  credits  are  made  at  irregular  times,  the  details  can 
be  written  in  the  credit  book  itself  without  the  use  of  a  slip. 

When  coupon  bonds  fall  due  or  are  called  for  payment,  this  fact 
is  noted  on  both  the  collection  sheet  and  credit  slip,  the  amounts 
of  principal  and  interest  being  shown  separately.  The  bonds  are 
collected  with  the  coupons.  If  they  are  registered  as  to  principal, 
the  necessary  power  of  attorney  transferring  them  to  bearer  is 
attached. 

Redemption  provisions  are  noted  on  the  security  index  and  should 
be  examined  at  each  interest  period.  Issues  of  bonds  subject  to  re- 
demption must  be  carefully  kept  track  of,  for  there  is  constant  danger 
of  missing  a  call  and  learning  only  through  the  return  of  the  current 
coupons  that  the  bond  was  drawn  for  payment,  and  interest  ceased 
six  months  before.  The  financial  papers  should  be  watched  for  adver- 
tisements of  calls,  and  letters  should  be  written  to  obtain  information 
which  cannot  be  otherwise  secured.  It  is  also  wise  to  have  small 
printed  slips  which  can  be  put  with  the  coupons,  asking  that  notice  be 
sent  if  any  bonds  of  the  issue  have  been  called. 

In  the  collection  of  interest  on  registered  loans,  the  index  of  secu- 
rities provides  data  for  filling  out  a  collection  sheet  with  the  title  of 
the  security,  amount  of  principal,  rate  of  interest,  gross  amount, 
deductions  for  tax,  and  net  amount.  Columns  follow  showing  where, 
how,  and  when  payable,  date  paid,  and  other  remarks. 

In  most  cases  registered  interest  checks  are  received  by  mail.  The 
remainder  are  collected  by  messenger  or  by  the  deposit  of  interest 
orders  through  bank.  Credit  slips  and  a  credit  book  are  used,  and 
the  paid  items  are  treated  exactly  as  in  the  case  of  coupons.  Regis- 
tered bonds  due  or  called  for  payment  must  always  be  accompanied 
by  the  proper  power  of  attorney.  When  registered  loans  are  called 
for  payment,  notice  is  usually  sent  directly  to  the  owner,  which  of 
course  cannot  be  done  in  the  case  of  bearer  securities. 

The  collection  of  dividends  is  like  that  of  registered  interest.  The 
collection  sheet  shows  the  name  of  the  stock,  total  shares  held,  rate 
paid,  total  amount,  deductions  for  tax,  and  net  amount ;  where,  how, 
and  when  payable,  date  paid,  and  other  remarks.  The  credit  slips 
show  the  number  of  shares  held  by  each  estate,  the  rate  and  net 
amount  of  the  dividends.  Irregular  and  non-dividend-paying  stocks 


1 66  THE   MODERN  TRUST  COMPANY 

must  be  carefully  watched  in  order  not  to  overlook  dividend  pay- 
ments. The  date  and  rate  of  each  dividend  are  recorded  on  the 
back  of  the  description  card  in  the  security  index. 

Notes  and  other  items  not  falling  into  the  general  classes  already 
described  are  collected  by  the  same  methods  as  registered  securities. 
Each  item  has  to  be  treated  separately,  however,  and  in  the  case  of 
notes  it  may  be  necessary  to  have  them  protested  if  not  paid.  Either 
separate  books  or  the  same  credit  book  can  be  used  for  coupons, 
interest  on  registered  loans,  dividends,  notes,  etc. 

When  coupons  are  returned  unpaid,  they  are  attached  to  the  bonds. 
A  record  of  all  coupons  and  registered  interest  in  default  is  kept  and, 
when  necessary,  steps  are  taken  to  protect  the  owners. 

CARE  OF  MORTGAGES 

First  mortgage  loans  on  improved  city  real  estate  with  ample 
margin  are  among  the  safest  investments  that  a  trust  company  can 
secure.  It  is,  however,  necessary  to  ascertain  in  every  case  not  only 
the  value  of  the  real  estate,  but  its  freedom  from  encumbrances  and 
the  validity  of  the  title.  Compensation  for  the  time  and  labor  in- 
volved in  negotiating  a  mortgage  loan  is  found  in  the  fact  that  the  rate 
of  interest  is  likely  to  be  higher  than  that  yielded  by  other  equally 
secure  investments. 

The  first  step  before  investing  in  a  bond  and  mortgage  upon  real 
estate  is  to  obtain  a  full  knowledge  of  the  property  which  is  to  secure 
the  loan.  It  is  usual  to  require  the  applicant  to  fill  out  a  printed  form 
giving  details  as  to  the  amount  of  the  loan  desired,  the  period  for 
which  it  is  to  run  and  the  rate  of  interest,  the  name  of  the  maker  of 
the  mortgage,  the  location  of  the  property,  its  size  and  the  improve- 
ments on  it,  the  value  of  both  ground  and  improvements,  the  rental 
value,  and  the  amount  for  which  the  property  is  assessed  for  taxa- 
tion. Other  questions  cover  encumbrances  which  might  affect  the 
title,  such  as  municipal  improvements  in  the  neighborhood  and  already 
existing  liens. 

To  verify  this  information,  the  property  is  examined  by  the  trust 
company's  experts,  and  their  reports,  based  on  personal  inspection 
and  knowledge  of  real  estate  values,  serve  as  a  guide  in  the  final 
acceptance  or  rejection  of  the  mortgage. 


INDIVIDUAL  TRUST   DEPARTMENT  167 

Applications  may  be  made  for  loans  to  be  secured  by  mortgage 
to  be  placed  on  the  owner's  unencumbered  property,  or  by  a  purchase 
money  mortgage,  or  by  an  already  existing  mortgage  to  be  assigned 
to  the  company.  In  every  case,  the  same  general  procedure  is 
followed  in  the  examination  of  the  title  and  valuation  of  the  prop- 
erty. When  an  existing  mortgage  is  purchased,  an  assignment  is 
made  by  the  mortgagee  who  is  usually  required  to  furnish  a  certifi- 
cate of  "no  defence"  or  "no  set-off"  from  the  mortgagor,  admitting 
the  existence  of  the  debt. 

In  some  parts  of  the  United  States  it  is  customary  to  execute  a 
note  for  the  amount  of  the  loan,  often  with  interest  coupons  attached, 
and  a  trust  deed  conveying  real  property  as  collateral  security.  The 
interest  coupons  and  principal  note  are  generally  payable  at  the  office 
of  the  bank,  trust  company,  or  other  institution  which  negotiated  the 
loan.  Each  change  in  ownership  of  the  obligation  requires  the  exe- 
cution of  an  assignment  which  is  usually  placed  on  record  in  the 
county  in  which  the  property  is  located.  Mortgage  loans  of  this 
character  are  more  easily  negotiated  when  the  note  and  the  trust 
deed  conveying  the  property  as  collateral  are  issued  in  the  name  of 
a  trustee  who  authenticates  the  note  and  keeps  possession  of  the  trust 
deed,  attending  to  all  details  as  in  the  case  of  a  corporate  bond  issue. 
The  interest  notes  or  coupons  are  collected  through  bank  as  they 
mature  and  are  payable  at  the  office  of  the  trustee.  On  payment  of 
all  the  interest  and  principal  notes,  the  borrower  obtains  from  the 
trustee  a  release  of  the  property  which  had  been  conveyed  as  collateral 
security.  The  exact  method  in  each  state  varies  according  to  local 
practice  and  legal  requirements.  In  making  real  estate  loans,  most 
trust  companies  use  their  own  standard  forms  of  bond  and  mortgage, 
approved  by  counsel. 

On  the  acceptance  of  an  application  for  a  mortgage  loan,  the  owner 
of  the  property  or  mortgagor  executes  a  proper  instrument  evidencing 
his  indebtedness  and  a  mortgage  covering  the  real  estate  as  security 
for  the  loan.  Settlement  is  made,  and  at  the  same  time  the  mortgage 
is  placed  on  record  in  the  proper  office  for  the  recording  of  deeds. 
Until  satisfied  of  record,  the  mortgage  remains  a  lien  against  the  prop- 
erty. A  brief  of  title  and  counsel's  opinion,  or  the  policy  of  a  title 
insurance  company,  is  usually  required.  A  title  insurance  company 
may  take  charge  of  drawing  the  papers,  making  settlement,  and  re- 


!68  THE  MODERN  TRUST  COMPANY 

cording  the  mortgage.  When  a  trust  company  has  a  title  insurance 
department,  settlements  in  connection  with  mortgage  loans  are  made 
through  this  department.  The  borrower  pays  the  conveyancing 
charges  and  cost  of  the  title  insurance  policy. 

Mortgages  should  be  taken  in  the  names  of  the  accounts  for 
which  they  are  purchased.  A  mortgage  too  large  to  be  taken  by  a 
single  account,  may  be  made  to  the  trust  company  as  trustee,  to 
secure  an  issue  of  bonds,  either  registered  or  coupon,  which  are  allotted 
to  the  various  accounts  for  which  the  investment  is  made.  Or  both 
bond  and  mortgage  may  be  executed  in  the  name  of  the  trust  company 
as  trustee,  and  the  company  may  issue  its  declarations  of  trust  speci- 
fying the  proportion  of  the  loan  to  which  each  account  is  entitled. 
Some  companies  are  content  to  take  such  mortgages  in  their  own  name 
as  trustee,  simply  showing  by  a  distribution  in  the  mortgage  ledger 
the  amounts  of  principal  and  interest  belonging  to  the  various  accounts 
for  which  the  mortgage  is  held. 

If  part  of  the  mortgage  loan  is  secured  by  improvements  upon 
the  real  estate,  it  is  customary  to  require  the  maker  of  the  mortgage 
to  carry  sufficient  fire  insurance  to  cover  the  amount  so  secured. 
The  policies  are  generally  made  payable  to  the  mortgagee,  as  his  inter- 
est may  appear  in  case  of  loss. 

Unpaid  taxes  being  in  many  parts  of  the  country  a  prior  lien 
against  real  estate,  it  is  necessary  to  know  that  all  taxes  are  regularly 
paid.  A  clause  in  the  mortgage  generally  provides  that  receipted 
tax  bills  shall  be  exhibited  annually. 

Bills  for  interest  are  sent  at  regular  periods  and  receipts  are  given 
covering  each  payment.  When  mortgage  loans  mature,  if  not  paid 
off  they  may  be  allowed  to  run  on  as  demand  loans,  payable  at  the 
pleasure  of  either  borrower  or  lender,  or  they  may  be  extended  for  a 
definite  or  indefinite  period,  according  to  special  agreement.  Many 
mortgage  loans  are  allowed  to  run  on  after  maturity,  and  agreements 
as  to  rate  of  interest  and  payments  on  account  of  principal  are 
entered  into  according  to  the  exigencies  of  the  case. 

All  payments  on  account  of  principal  should  be  indorsed  on  the 
bond  or  note,  so  that  it  shall  at  all  times  agree  with  the  books  of 
record.  After  the  final  payment  is  made,  the  mortgage  is  satisfied 
of  record,  it  being  customary  for  the  satisfaction  fee  to  be  paid  by 
the  mortgagor. 


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INDIVIDUAL  TRUST  DEPARTMENT  169 

In  case  of  non-payment  of  interest  or  principal,  or  failure  to 
comply  with  any  other  provision  of  the  mortgage,  the  papers  are  placed 
in  the  hands  of  counsel,  and  suit  is  entered  to  foreclose  the  mort- 
gage. The  company  which  is  too  liberal  in  the  amounts  of  its  loans 
is  likely,  in  times  of  depression,  to  find  many  foreclosure  suits  on  its 
hands  and  to  be  forced  to  take  title  to  properties  which  have  to  be 
held  indefinitely  before  they  can  be  disposed  of. 

Mortgage  papers  are  matters  of  public  record,  and  therefore  their 
care  does  not  require  quite  so  many  precautions  against  loss  as  do 
stocks  and  bonds  not  of  public  record.  They  should  be  kept  in  a 
vault  if  possible,  or  at  least  in  locked  metal  cases.  Each  mortgage 
should  be  placed  in  a  separate  box  or  collapsible  envelope,  and 
should  be  filed  according  to  the  number  of  the  account  to  which  it 
belongs.  If  pasteboard  boxes  are  used,  they  should  open  at  the  end, 
in  the  form  of  a  slide  fitting  into  a  cover,  and  have  the  number  of 
the  account  written  on  the  exposed  end  of  the  box.  The  boxes  should 
be  arranged  on  shelves.  If  envelopes  are  used,  they  should  be  placed 
upright  in  files  —  preferably  metal  files.  On  each  envelope  the  num- 
ber of  the  account  and  of  the  mortgage  is  indorsed,  and  on  the  out- 
side of  the  file  the  numbers  of  the  accounts  included  in  it.  Mortgages 
may  also  be  kept  in  a  vertical  file  or  in  portfolios. 

The  mortgage  ledger  is  the  volume  in  which  a  complete  record  of 
each  mortgage  loan  is  kept.  Either  a  loose-leaf  book  or  cards  can 
conveniently  be  used.  Each  mortgage  has  a  separate  page  or  card. 
At  the  top  is  shown  the  number  and  name  of  the  trust  account  which 
holds  the  investment,  followed  by  a  description  of  the  mortgage. 
This  includes  the  name  and  address  of  the  interest  payer,  the  name 
of  the  mortgagor,  a  description  of  the  property  and  improvements 
including  valuations,  the  date  of  maturity,  the  interest  rate  and  pe- 
riods, by  whom  the  state  tax,  if  any,  is  paid,  and  the  date  and  place 
of  record  of  the  mortgage.  This  description  can  be  much  elaborated, 
but  a  concise  abstract  of  the  salient  facts  is  enough.  A  short  section 
follows  in  which  cash  principal  transactions  are  recorded.  The  col- 
umns are  for  the  date,  amount  paid,  balance,  date,  and  amount  re- 
ceived. The  lower  part  of  the  front  and  the  entire  back  of  the  sheet 
or  card  are  devoted  to  interest  payments.  Two  columns  show  the  date 
and  amount  of  interest  accrued ;  two,  the  date  and  amount  of  the  pay- 
ments; and  a  column  headed  "Tax  receipts  shown  for"  provides 


THE  MODERN   TRUST  COMPANY 

space  for  entering  the  year  of  the  paid  tax  bills  which  have  been  sub- 
mitted for  inspection. 

In  places  where  county,  city,  borough,  school,  road,  or  other  local 
taxes  are  paid  to  different  collectors,  and  all,  when  unpaid,  are  liens 
against  the  property,  it  may  be  necessary  to  have  a  column  for  each  tax. 
The  interest  columns  take  but  half  the  width  of  a  page,  and  are  re- 
peated so  as  to  save  space  and  provide  for  enough  entries  to  cover 
the  life  of  most  mortgage  loans.  When  a  loose-leaf  ledger  is  used, 
the  sheets  are  sorted  according  to  interest  periods,  and  each  pe- 
riod is  arranged  alphabetically  by  the  names  of  interest  payers.  A 
card  ledger,  with  projecting  tabs  to  show  the  months  in  which  the 
interest  payments  fall  due,  makes  it  possible  to  file  all  the  cards 
alphabetically  under  the  names  of  the  interest  payers,  and  saves 
having  a  separate  index  for  this  purpose,  while  the  tabs  serve  as  an 
index  to  interest  periods. 

Sheets  or  cards  containing  closed  accounts  are  placed  in  a  transfer 
binder  or  separate  index,  so  that  only  live  accounts  appear  in  the 
active  ledger.  Closed  accounts  are  filed  by  the  names  of  the  interest 
payers. 

When  settlement  is  to  be  made  for  a  mortgage,  a  charge  slip  is 
filled  out,  authorizing  the  teller  to  issue  a  check  in  payment.  This 
slip  becomes  a  voucher  in  his  settlement.  It  bears  the  date,  number, 
and  name  of  the  account  charged,  the  name  of  the  mortgagor,  amount 
paid,  location  of  the  property,  name  and  address  of  the  interest  payer, 
and  the  signature  of  the  proper  officer.  It  also  bears  the  following 
memoranda:  posted  in  individual  trust  ledger;  posted  in  mortgage 
ledger ;  entered  in  general  cash  book ;  entered  in  record  of  securities 
received.  As  each  of  these  postings  is  made,  the  bookkeeper  initials 
the  slip.  These  mortgage  charge  slips  should  correspond  in  size  with 
all  other  charge  and  credit  slips  used. 

Bills  and  credit  slips  representing  principal  and  interest  receipts 
are  written  up  by  the  mortgage  bookkeeper  from  the  ledger  in  advance. 
Both  bills  and  credit  slips  contain  the  same  information,  and  by  using 
a  carbon  sheet  they  can  be  made  out  together.  The  bills  should  fit 
one  of  the  company's  standard  envelopes  without  folding,  and  bear 
a  notice  that  the  bill  must  be  presented  at  the  trust  department  re- 
ceiving teller's  window  when  payment  is  made.  A  statement  of  the 
necessity  for  prompt  payment  may  be  added. 


INDIVIDUAL  TRUST  DEPARTMENT  I/I 

The  credit  slips  are  turned  over  to  the  receiving  teller  and  are 
arranged  by  due  dates  and  under  each  date  according  to  the  names 
of  the  payers.  When  the  bill  is  presented  for  payment,  the  corre- 
sponding credit  slip  is  removed  from  the  teller's  index,  and  after 
verification  the  bill  is  receipted  and  the  credit  slip  is  stamped  paid. 
The  slip  then  serves  as  a  voucher  and  the  source  from  which  the  later 
entries  are  made. 

When  the  loan  is  represented  by  a  note  with  coupons  attached,  no 
bills  are  sent  but  instead  the  coupons  are  cut  and  forwarded  for  col- 
lection. The  credit  slips  are,  however,  made  out  and  used  in  the 
same  way. 

Principal  and  interest  receipts  are  distinguished  by  different  colors 
of  paper  or  ink.  The  bill  and  credit  slip  for  principal  items  show 
the  name  and  address  of  the  payer,  date  due,  location  of  property, 
amount  of  payment,  number  and  name  of  trust  account,  and  posting 
memoranda  covering  'the  individual  trust  ledger,  mortgage  ledger, 
general  cash  book,  and  record  of  securities  delivered. 

The  bill  and  credit  slip  for  interest  specify  the  name  and  address 
of  the  payer,  the  period  covered  by  the  payment,  the  date  on  which 
it  falls  due,  its  amount,  the  location  of  the  mortgaged  property,  and 
the  number  and  name  of  the  trust  account.  The  posting  memoranda 
cover  the  individual  trust  ledger  and  mortgage  ledger.  The  separate 
items  of  interest  receipts  are  not  extended  in  the  general  cash  book, 
only  the  total,  as  shown  by  the  teller's  settlement,  being  posted 
there. 

A  scratcher  is  used  by  the  mortgage  bookkeeper  in  which  all 
receipts,  both  principal  and  income,  are  listed.  The  book  is  ruled 
to  show  the  date  and  name  of  payer,  with  two  columns  for  principal 
and  interest  respectively.  The  mortgage  bookkeeper's  totals  settle 
with  those  of  the  teller.  All  postings  are  made  from  the  credit  slips 
direct.  Each  day's  work  should,  however,  be  checked  back  from 
the  scratcher  to  the  mortgage  ledger  to  verify  the  entries. 

In  addition  to  the  books  of  record,  it  is  well  to  have  an  index  of 
mortgagors  combined  with  a  cross  index  of  interest  payers  on  differ- 
ent colored  cards  filed  together  alphabetically  by  names.  The  mort- 
gagor cards  give  the  name  of  the  mortgagor,  location  of  the  property, 
name  of  the  interest  payer  and  the  interest  periods.  On  the  payer's 
cards  are  the  payer's  name  and  address,  followed  by  the  location  of 


172  THE  MODERN  TRUST  COMPANY 

the  property,  the  name  of  the  mortgagor,  and  the  interest  periods. 
If  the  mortgage  ledger  is  kept  on  cards  under  the  names  of  payers, 
this  cross  index  of  payers  is  not  needed. 

A  location  index  is  useful  in  finding  mortgages  when  the  names 
are  not  known  and  in  showing  the  number  of  mortgage  loans  in 
each  locality.  It  is  arranged  primarily  as  to  states  and  is  subdi- 
vided according  to  counties,  towns,  and  streets.  The  same  informa- 
tion is  given  as  in  the  index  of  mortgagors,  but  with  the  location  of 
the  property  on  the  top  line. 

An  index  showing  the  maturity  of  each  mortgage  loan  is  also  kept. 
It  contains  the  same  information  as  the  indexes  already  described. 
By  reference  to  the  maturity  index  the  question  of  demanding  pay- 
ment or  executing  an  extension  agreement  is  brought  up  for  decision, 
bills  for  principal  payments  are  sent  at  the  proper  time,  and  overdue 
items  are  kept  track  of.  Columns  to  be  initialled  in  the  record  of 
trust  securities  received  and  record  of  trust  securities  delivered,  insure 
the  making  of  entries  in  the  indexes. 

Records  of  fire  insurance  policies  held  as  collateral  security  with 
mortgages  can  be  kept  in  the  mortgage  ledger,  supplemented  by  an 
insurance  expiration  index,  or  if  the  mortgage  business  is  large,  sepa- 
rate insurance  records  may  be  necessary.  The  policies  can  be  kept 
with  the  mortgage  papers  if  the  business  is  small ;  in  larger  companies 
a  separate  arrangement  is  preferable.1 

The  ground  rent  which  is  found  in  Pennsylvania  is  "  a  rent  re- 
served to  himself  and  his  heirs  by  the  grantor  of  land  in  fee  simple, 
out  of  the  land  conveyed.'7  It  is  considered  as  real  estate.  The 
making  of  irredeemable  ground  rents  is  no  longer  permitted  in  Penn- 
sylvania. The  Pennsylvania  Act  of  June  24,  1885,  provides  that 
thereafter  "no  irredeemable  or  non-extinguishable  ground  rent  shall 
be  charged  upon  or  be  reserved  out  of  or  for  any  land  within"  that 
commonwealth,  and  that  the  period  for  the  extinguishment  of  any 
such  rent  shall  not  be  postponed  "longer  than  twenty-one  years,  or 
a  life  or  lives  in  being." 

The  ground-rent  system  in  force  in  Maryland  "differs  from  that 
of  Pennsylvania  in  that  the  term  is  used  to  designate  the  rent  reserved 
upon  lease  for  ninety-nine  years,  renewable  forever." 

1  Seep.  181. 


INDIVIDUAL   TRUST   DEPARTMENT  173 

The  bookkeeping  for  ground  rents  is  practically  the  same  as  for 
mortgages,  and  may  be  done  in  the  same  department. 

CARE   OF  REAL  ESTATE 

In  a  company  which  controls  a  small  number  of  properties,  the 
care  of  real  estate  may  be  combined  with  that  of  personal  property, 
only  the  system  of  records  being  kept  distinct.  With  increase  in  busi- 
ness comes  the  establishment  of  a  real  estate  department,  sometimes 
entirely  separate  from  the  rest  of  the  individual  trust  department. 
However  distinct  its  organization  may  be,  the  real  estate  department 
should  nevertheless  be  considered  a  division  of  the  individual  trust 
department  and  be  in  charge  of  a  real  estate  officer  responsible  to 
the  trust  officer. 

The  real  estate  officer  should  be  an  expert  in  land  values.  His 
position  is  no  sinecure,  for  he  represents  the  owner,  who  usually  is 
anxious  for  larger  returns  on  his  investment,  while  the  tenants  clamor 
for  repairs,  improvements,  and  reduction  of  rent,  and  cannot  be 
ignored  if  the  company's  good  name  as  landlord  is  to  be  preserved. 
It  would  seem  that  no  real  estate  officer  can  hope  to  be  popular  with 
all  those  with  whom  he  has  to  deal,  but  a  reputation  for  being  just  is 
at  least  within  his  reach.  He  should  be  supported  by  an  office  force 
adequate  to  care  for  the  many  details  connected  with  managing  real 
estate.  Nothing  does  more  to  make  a  satisfied  tenant  than  the  knowl- 
edge that  his  requests  will  receive  prompt  and  considerate  attention. 
If  many  of  the  tenants  are  foreigners,  it  is  advantageous  to  have 
some  employees  who  can  speak  to  them  in  their  own  languages. 

Real  estate  for  which  the  company  acts  as  agent  is  managed 
according  to  the  directions  of  the  owners.  When  acting  as  a 
trustee,  the  company  is  governed  by  the  nature  of  its  appointment 
and  authority.  The  law  of  real  estate,  as  distinct  from  that  of  per- 
sonal property,  is  a  large  field  where  much  special  knowledge  is 
required.  When  the  power  of  sale  is  not  specifically  given  in  the 
will  or  deed,  the  executor  or  trustee  can  sell,  if  at  all,  only  with  the 
approval  of  court. 

It  is  the  duty  of  the  real  estate  department  to  pay  taxes  and  keep 
improved  properties  insured,  rented,  and  in  good  order;  to  preserve 
unimproved  properties  intact  and  prevent  trespass.  As  soon  as  a 


1/4  THE  MODERN   TRUST  COMPANY 

property  is  placed  in  the  hands  of  the  trust  company,  notice  of  its 
appointment  is  given  the  tenants  and  an  examination  is  made,  of  which 
a  full  record  is  kept.  If  leases  are  assigned  to  the  trust  company,  an 
abstract  of  each  one  should  be  entered  in  the  real  estate  ledger.  It 
should  be  ascertained  at  once  what  charges  are  against  the  premises, 
—  interest,  taxes,  municipal  or  other  claims,  —  in  order  that  proper 
provision  may  be  made  for  their  payment.  If  the  assessment  of 
taxes  is  excessive,  appropriate  steps  should  be  taken  to  obtain  a 
reduction.  Taxes  should  be  paid  as  the  circumstances  of  the  estate 
will  allow,  so  as  to  take  the  best  advantage  of  possible  discounts  and 
escape  penalties  for  non-payment.  If  the  improvements  are  already 
insured,  the  policies  should  be  examined  to  determine  the  standing 
of  the  companies,  whether  the  amount  carried  is  adequate,  and  whether 
the  papers  are  in  proper  form.  If  the  property  is  uninsured  or  the 
amount  is  insufficient,  new  policies  should  be  promptly  taken  out. 

When  properties  are  vacant,  it  is  not  enough  to  hang  out  a  "To 
rent"  sign  and  wait  until  chance  brings  along  a  customer.  Many 
methods  are  now  used  for  coming  in  touch  with  prospective  tenants, 
and  the  offerings  of  the  real  estate  department  are  often  more  widely 
advertised  than  any  other  branch  of  the  company's  business.  Lists 
describing  all  properties  for  sale  and  rent  should  be  printed  at  fre- 
quent intervals.  All  inquiries  should  be  promptly  answered,  and 
followed  up  when  advisable.  Newspaper  advertising  can  also  be 
made  effective. 

The  trust  company's  reputation  as  a  landlord  may  be  a  potent 
factor  in  the  success  of  its  real  estate  business.  Improved  real  estate 
should  always  be  kept  in  as  good  condition  as  when  received.  In 
the  long  run,  it  is  to  the  owner's  advantage  to  keep  buildings  in  thor- 
ough repair,  the  actual  amount  of  money  spent  for  maintenance  or 
for  improvements  depending  upon  the  character  of  the  property  and 
its  tenants,  and  the  purposes  for  which  it  is  used.  Slum  properties 
may  require  a  very  different  policy  as  to  repairs  from  the  better  classes 
of  houses.  A  request  coming  after  the  first  warm  days  of  spring,  to 
"Please  send  a  blumbber  to  figs  our  bath-tup,  it  soon  be  time  now  to 
use  him  agen,"  may  well  make  one  hesitate  before  making  elaborate 
repairs  when  the  bath-tub  has  probably  served  as  a  coal- bin  all  through 
the  winter  months. 

All  complaints  should  be  promptly  investigated,  and  care  should 


INDIVIDUAL  TRUST  DEPARTMENT  175 

be  taken  not  to  allow  the  property  to  deteriorate  through  lack  of 
inspection.  Inspectors  should  have  practical  knowledge  which  will 
enable  them  to  report  intelligently  on  the  advisability  of  making 
repairs,  alterations,  or  improvements,  as  well  as  on  the  character  of 
the  completed  work.  Except  in  cases  of  emergency,  competitive 
bids  should  be  secured,  care  being  taken  that  the  specifications  are 
uniform  and  that  none  but  trustworthy  firms  are  permitted  to  esti- 
mate. So  far  as  possible,  all  requests  from  tenants  and  all  orders 
for  work  should  be  in  writing.  A  written  report  from  the  tenant  as 
to  the  satisfactory  completion  of  minor  repairs  will  often  obviate  the 
necessity  of  an  inspection. 

Rent  bills  should  be  mailed,  and  tenants  should  be  encouraged  to 
pay  by  check  in  the  same  way.  Some,  however,  prefer  to  call  in 
person  or  want  receipts  in  a  rent  book  instead  of  using  loose  bills. 
In  the  case  of  small  properties,  a  collector  must  usually  be  sent  to 
call  for  the  rent  as  it  becomes  due.  When  properties  are  not  within 
reach,  it  is  generally  necessary  to  employ  sub-agents  both  to  collect 
rents  and  attend  to  repairs. 

It  is  important  to  keep  records  to  show  the  income  received  from 
each  property,  the  repairs  asked  for  and  made,  and  other  pertinent 
facts.  Out  of  the  gross  income  received,  fixed  charges  such  as  taxes, 
assessments,  insurance,  interest  on  mortgages,  as  well  as  the  cost  of 
repairs,  must  be  deducted  in  order  to  determine  the  net  return  from 
the  property. 

Large  building  operations  are  often  conducted  either  as  agent 
for  the  owner  or  to  develop  properties  held  as  trustee.  In  such 
cases  the  trust  company,  if  properly  protected,  may  often  make 
large  advances  greatly  to  the  advantage  of  the  estate  and  without 
risk  to  itself. 

The  lease  forms  a  contract  between  landlord  and  tenant,  and  gov- 
erns their  actions.  It  is  usually  executed  in  duplicate,  one  copy  being 
retained  by  each.  Its  terms  define  in  detail  the  rights  and  duties  of 
both  parties.  The  leases  are  best  filed  by  the  number  of  the  trust 
account  and  under  each  account  by  the  names  of  the  tenants.  The 
trust  company  must  use  reasonable  diligence  in  ascertaining  whether 
the  tenant  complies  with  the  terms  of  the  lease.  When  properties 
are  used  for  unlawful  purposes,  the  landlord  may  be  held  responsible. 
It  is  well  to  obtain  as  much  information  as  possible  in  regard  to  the 


176  THE  MODERN   TRUST   COMPANY 

character  and  responsibility  of  tenants,  before  renting,  as  the  process 
of  eviction  may  be  troublesome  and  costly. 

Trust  companies  are  often  made  trustees  for  burial  lot  funds,  the 
principal  to  be  kept  intact  and  the  income  to  be  used  for  the  care  of 
the  lots.  In  such  cases,  the  real  estate  department  makes  periodical 
inspections  and  attends  to  the  maintenance  of  lots  and  monuments. 

The  correspondence  of  the  real  estate  department  is  usually  large 
and  space  and  labor  can  be  saved  by  filing  together  all  letters  in  regard 
to  each  property.  Many  general  letters  of  only  passing  value,  such 
as  requests  for  rent  lists,  may  be  filed  by  subjects  and  so  sifted  out 
from  the  more  important  correspondence.1 

Title  papers,  being  bulky  and  of  various  shapes  and  sizes,  are  best 
kept  in  heavy  expansion  envelopes,  those  belonging  to  each  property 
in  a  separate  envelope.  The  envelopes  are  filed  by  the  numbers  of 
the  trusts  to  which  they  belong,  as  in  the  case  of  mortgages.  Title 
papers  are  recorded  in  accordance  with  the  laws  of  the  state  in  which 
the  real  estate  is  located.  A  new  deed  is  prepared,  executed,  acknowl- 
edged, and  recorded,  with  each  change  of  ownership  of  real  estate, 
except  when  upon  the  death  of  the  owner  the  title  to  property  passes 
by  will  or  under  the  intestate  laws,  or  where  as  in  Illinois  the  Tor- 
rens  system  of  registration  of  titles  is  in  use.2 

1  See  Correspondence  or  Mail  Room,  p.  249. 

2  "  Very  early  in  her  history  South  Australia  passed  a  law  relating  to  land  for  which 
the  other  six  colonies  still  owe  her  a  debt  of  gratitude.     The  Torrens  Land  Transfer 
Act,  placed  on  the  statute-book  in  1858,  sprang  from  the  brain  of  an  intelligent  Collec- 
tor of  Customs  at  Adelaide,  who,  having  seen  in  early  life  something  of  the  ways  of  the 
English  Court  of  Chancery,  had  come   to   hold  very  strong  views  about   exorbitant 
legal  charges.     He  thought  out  a  plan  by  which  a  system  of  registered  proprietorship 
should  cheapen  and  simplify  future  dealings  with  land.     This  he  submitted  to  the  most 
eminent  local  legal  authorities,  and  they  threw  cold  water  upon  it.     Not  disheartened, 
Torrens  found  less  learned  advisers  who  thought   better  of  it.     An  agitation  in  its 
favour  was  begun,  and  after  a  short  contest  with  the  legal  profession,  the  laymen  won 
the  day.     After  watching  it  at  work  in  South  Australia,  colony  after  colony  adopted  the 
Torrens  law  with  but   little  change.     Now  forty  years  have  passed,  and   the  colonial 
system  of  land  transfer  is  still  in  substance  the  plan  hit  upon  by  the  ingenious  customs 
officer.     Everywhere  it  works  smoothly  and  usefully.     Land  registry  offices  are  open  in 
every  large  district.     Any  proprietor  may  apply  to  register  his  land  in  one  of  these. 
After  proper  investigation  by  the  public  examiner  of  titles,  his  title  and  the  description 
of  his  land  are  inscribed  in  one  of  the  office  ledgers.     From  that  moment  he  is  a  regis- 
tered proprietor,  and  any  innocent  purchaser  from  him  has  an  indefeasible  title.     There- 
after any  person  dealing  with  the  land  has  merely  to  send  an  agent  to  the  registry  office. 
A  memorandum  of  the  transaction  —  sale,  lease,  or  mortgage  —  is  inscribed  on  the  page 


INDIVIDUAL  TRUST  DEPARTMENT  177 

The  rent  ledger,  preferably  a  loose-leaf  book,  contains  a  sheet  for 
each  property,  or  if  there  are  several  tenants  in  any  one  property,  a 
sheet  for  each.  It  is  arranged  primarily  by  the  number  of  the  trust 
account,  then  according  to  properties  and  tenants.  At  the  head  of 
each  sheet  appear  the  number  and  name  of  the  trust  and  the  location 
of  the  property,  then  the  name  of  the  tenant  and  the  terms  of  the 
lease.  The  tenant's  name  and  facts  about  the  lease  take  only  one 
line,  and  it  is  well  to  provide  at  least  six  lines  so  that  a  new  sheet 
need  not  be  made  out  every  time  the  tenant  changes.  The  cash 
section  is  divided  into  debits  and  credits.  Under  debits  appear  the 
date,  description  of  the  item,  and  a  cash  column ;  under  credits, 
date  and  a  cash  column.  The  sheet  is  ruled  and  printed  on  both 
sides.  The  debits  and  credits  fill  only  half  the  width  of  the  page  and 
can  be  repeated.  A  sheet  is  inserted  in  the  ledger  on  receipt  of  each 
new  property,  whether  improved  or  unimproved,  rented  or  vacant. 
Only  live  matter  is  contained  in  the  book.  Sheets  for  properties 
which  have  gone  out  of  the  company's  possession,  and  sheets  which 
have  been  replaced  by  new  ones,  are  filed  in  a  transfer  binder. 

In  the  collection  of  rents  there  is  more  opportunity  for  crooked 
work  than  in  any  other  part  of  a  trust  company's  business.  Any  one 
who  has  access  to  the  rent  ledger,  or  who  can  hold  up  a  credit  slip  on 
its  way  from  the  real  estate  bookkeeper  to  the  individual  trust  book- 
keeper, is  in  a  position  to  collect  and  retain  rents.  The  trouble  lies 
in  the  difficulty  of  maintaining  a  rent  roll  on  a  double  entry  basis. 
The  trust  company  is  quite  properly  unwilling  to  make  itself  respon- 
sible for  rents  until  they  are  collected,  and  the  large  number  of  cor- 
recting entries  for  changes  in  rental,  bad  debts,  etc.,  which  would 
follow  the  adoption  of  a  double  entry  system,  makes  it  almost  im- 
practicable. A  system  of  internal  checks  should  be  faithfully  main- 
tained by  abstracting  the  total  credits  shown  by  the  rent  ledger  and 

of  the  office  ledger  devoted  to  the  particular  property.  A  duplicate  of  the  memoran- 
dum is  handed  to  the  agent,  who  may  or  may  not  be  a  solicitor,  and  the  business  is 
completed  in  an  hour  for  a  tithe  of  the  cost  to  a  conveyancer's  client  under  the  old 
system.  The  transfer  system's  importance  is  due,  in  great  measure,  to  its  being  in  part 
compulsory.  All  land  acquired  from  the  State,  after  the  coming  into  force  of  the 
Transfer  Acts,  is  placed  under  them  as  a  matter  of  course.  The  registration  of  other 
private  lands  is  optional,  and  though  the  older  system  is  being  gradually  extinguished, 
it  dies  hard."  — W.  P.  Reeves,  "State  Experiments  in  Australia  and  New  Zealand," 
Vol.  I,  pp.  21 1-212. 

N 


i 


I 


1 1 


I  » 


178 


INDIVIDUAL  TRUST  DEPARTMENT  179 

comparing  them  with  the  amounts  which  have  been  credited  in  the 
individual  trust  ledgers.  This  proves  that  the  items  appearing  in 
the  rent  ledgers  have  also  reached  the  individual  trust  ledgers. 

The  index  of  properties  is  arranged  alphabetically  as  to  states, 
counties,  cities,  and  streets,  and  then  numerically  as  to  street  numbers. 
Besides  the  location,  the  cards  give  the  number  and  name  of  the 
account  to  which  each  property  belongs  and  may  also  give  a  full  de- 
scription of  the  property,  a  record  of  the  assessment,  net  return  from 
the  property,  and  amount  of  insurance  carried.  The  index  may,  if 
desired,  be  separated  into  two  main  divisions,  —  rented  and  vacant 
properties. 

The  index  of  tenants  is  arranged  alphabetically,  shows  the  name 
of  the  tenant,  the  property  rented,  and  the  number  and  name  of  the 
trust  account  which  owns  it.  The  card  may  also  contain  an  abstract 
of  the  lease,  and  data  concerning  the  tenant. 

The  maturity  index,  arranged  chronologically,  contains  the  record 
of  maturing  leases,  tile  dates  on  which  notice  to  vacate  must  be  given, 
and  other  matters  which  may  require  attention. 

The  data  for  opening  and  closing  accounts  in  the  rent  ledger  and 
indexes  are  found  in  the  books  of  securities  received  and  delivered.1 
The  record  of  properties  rented  and  vacated  is  another  book  from 
which  entries  are  made  in  the  ledger  and  indexes.  Like  the  accession 
books,  it  has  columns  to  be  initialled  when  the  various  entries  are 
made. 

The  rent  bill  and  credit  slip,  in  general  form,  are  similar  to  those 
for  mortgage  interest.2  They  bear  the  name  of  the  tenant,  the  address 
to  which  the  bill  is  sent,  the  number  of  the  trust  account,  the  property 
for  which  the  rental  is  charged,  balance  due,  rent  for  the  current 
period  specified  by  dates,  and  the  total  amount  due.  When  the  bills 
are  paid,  the  procedure  is  the  same  as  in  the  case  of  mortgage  interest.3 

Among  the  more  important  miscellaneous  real  estate  forms  are 
the  following:  a  printed  inspection  card  used  by  the  inspectors  at 
the  time  of  examination,  containing  spaces  for  all  data  which  should 
be  on  file  in  regard  to  the  property  and  its  condition;  agreement 
of  sale ;  memorandum  of  settlement,  which  serves  in  place  of  a  bill 
in  real  estate  sales  and  purchases,  and  shows  the  adjustments  of 
rent,  taxes,  interest,  etc.,  which  may  enter  into  these  transactions. 

1  See  p.  188.  2  See  p.  171.  8  See  p.  170. 


REAL  ESTATE   INSPECTION   CARD 

[FRONT] 
(North  i) 
(South  i) 
(East1) 

Street,  (West1)      No Ward 

..side feet._  ..inches ward  from  the. _  __side  of._.  ...Street 


Lot feet inches  front  by feet inches  deep  to 

Depth  of  building 

story building story  back  buildings  used  as. 

Containing rooms  in  all: 

ist  floor2. 

2d      «    2. 

3d      «    • - 


Cellar  floor ;  cement,  brick,  board,  dirt.     Heater  make size brick,  portable 

Range  make size ,  boiler;  circulating,  log 

Hydrant,  Sink,  Bath ;  open,  box.     Water  Closet ;  siphon,  flush,  hopper. 

Washstands  located 

Wash-tubs;  single,  double,  triplet,  located 

Drainage;  under,  surface.     Roof;  tin,  slag,  slate,  shingle,  compound. 

Pavement ;  cement,  stone,  brick,  board,  dirt. 

Gas,  Electric  Light.     Bell ;  pull,  electric.     Stairways ;  open,  box. 

Rear  outlet 

Adjoining  property  to  North,  East 

«  «         «  South,  West. 

Trust  No Name 

Date  vacated Date  inspected by 

1  Erase  unnecessary  words.  *  Beginning  with  front  of  house. 


[BACK] 


-1  r        I  §  * 

|  S  ,?  «T  3  Si 

l-  *8  ° 


* 


- 


0  X  £  O  <  >  H 

180 


INDIVIDUAL  TRUST  DEPARTMENT  l8l 

In  a  large  real  estate  business  many  other  printed  forms  may  be 
necessary. 

Keys  can  be  kept  conveniently  in  stout  manila  envelopes  of  uni- 
form size,  filed  by  the  location  of  the  property.  When  the  key  is 
borrowed,  a  receipt  should  be  taken  on  the  envelope,  which  is  kept  by 
the  company. 

Repairs  are  authorized  by  the  officer  who  rents  the  properties, 
subject  of  course  to  such  limitations  as  have  been  imposed  by  the 
owner.  On  receipt  of  a  complaint,  the  matter  is  referred  to  an 
inspector  or  a  mechanic  for  examination  and  report,  except  in  cases 
of  emergency,  when  the  work  is  at  once  ordered. 

All  orders  are  given  in  writing  on  special  order  forms  of  which 
carbon  copies  are  kept.  As  soon  as  the  work  is  completed,  bills  are 
rendered  on  forms  supplied  by  the  trust  company.  Separate  bills 
should  be  made  out  for  the  repairs  to  each  property.  After  inspection 
of  the  work,  and  verification  of  the  bill  in  connection  with  the  order, 
a  check  is  mailed,  which  bears  on  its  face  a  statement  that  it  is  in 
full  payment  for  work  done  and  materials  furnished  under  the  order 
or  orders  which  are  specified  by  number.  Each  bill  is  initialled  by 
the  inspector,  by  the  officer  who  ordered  the  work,  and  who  approves 
it  for  payment,  by  the  payment  clerk  when  the  check  is  issued, 
and  by  the  bookkeepers  who  enter  the  charge  in  the  real  estate  and 
individual  trust  ledgers.  The  bills,  which  serve  as  charge  slips  also, 
are  retained  and  filed,  and  the  indorsement  of  the  check  takes  the 
place  of  a  receipt.  The  payment  by  mail  of  bills  for  repairs  saves 
the  mechanics  or  their  representatives  many  unnecessary  visits  to 
the  office  of  the  trust  company. 

INSURANCE   ON   REAL   ESTATE 

Insurance  is  carried  on  improved  properties  owned  by  the  com- 
pany itself  or  held  for  trust  accounts.  Policies  of  insurance  are 
also  held  as  collateral  security  with  mortgage  loans  on  improved  real 
estate.  Insurance  may  cover  loss  by  fire,  boiler  explosions,  tornadoes, 
burglary,  and  breakage  of  plate  glass,  loss  of  rent,  and  liability  for 
accidents. 

Where  the  properties  and  mortgages  owned  and  controlled  are 
few  in  number,  the  insurance  policies  can  be  kept  and  recorded  in  the 
departments  in  which  the  investments  are  held.  If  the  amount  of 


1 82  THE  MODERN   TRUST   COMPANY 

insurance  carried  is  sufficient  to  justify  the  expenditure,  it  is  well 
to  have  all  policies  cared  for  by  some  one  with  special  qualifications 
for  this  duty. 

On  receipt  of  a  property  or  mortgage,  the  policies  are  turned  over 
to  the  insurance  clerk,  who  makes  sure  that  they  are  in  proper  form, 
that  they  are  written  by  responsible  companies,  and  that  the  total 
amount  carried  is  sufficient.  The  insurance  clerk  takes  out  new 
policies  as  the  old  ones  mature,  and  in  case  of  fire  represents  the 
trust  company  in  the  settlement  of  the  loss. 

A  maturity  book  or  index  is  kept  in  which  is  noted  the  date 
of  expiration  of  each  policy.  This  book  is  arranged  as  a  per- 
petual calendar,  with  one  page  for  each  day  in  the  year.  Each 
policy  is  entered  on  the  page  of  the  day  on  which  it  matures,  and 
the  year  is  written  in  pencil  as  the  last  item  of  the  record.  Or 
the  book  can  be  arranged  to  run  for  a  specified  time  with  a 
separate  space  for  each  day  during  the  period.  Maturities  can 
also  be  satisfactorily  recorded  on  a  card  index,  the  cards  arranged  in 
chronological  order,  according  to  the  date  of  maturity  of  the  policy. 
The  current  month  is  divided  by  guide  cards  according  to  days,  the 
current  year  by  months,  and  later  maturities  by  years.  The  maturity 
book  or  index  shows  the  number  and  name  of  the  account  for  which 
the  policy  is  held,  the  property  insured,  the  name  of  the  insurance 
company,  the  amount  and  date  of  expiration  of  the  policy.  It  may 
also  show  whether  the  policy  covers  property  owned,  or  held  as  col- 
lateral with  a  mortgage  loan. 

The  estate  index  is  arranged  alphabetically  by  the  titles  of  the 
trust  accounts.  Each  card  shows  the  name  and  number  of  the  estate, 
the  location  of  the  property  insured,  the  number  of  the  insurance 
policy,  company,  amount,  and  date  of  expiration.  If  the  policy 
is  held  as  collateral,  the  name  of  the  bondsman  and  amount  of  the 
mortgage  are  also  shown. 

The  location  index  is  arranged  alphabetically  by  states,  counties, 
etc.  The  cards  show,  besides  the  location,  the  name  and  number  of 
the  estate,  and,  if  collateral,  the  name  of  the  bondsman  and  amount 
of  the  mortgage.  Then  follows  an  itemized  list  of  all  the  insurance 
on  the  property,  giving  the  name  of  each  company  and  the  amount 
and  expiration  of  the  several  policies.  A  record  of  the  agents  of  the 
various  companies  and  the  brokers  through  whom  the  policies  are 


INDIVIDUAL  TRUST  DEPARTMENT  183 

placed,  can  also  be  made  on  the  location  cards.  When  there  have 
been  losses  by  fire,  this  index  is  the  first  to  be  consulted. 

The  "line"  index,  on  another  set  of  cards,  is  arranged  alphabeti- 
cally by  companies.  Under  each  company  the  cards  are  arranged 
according  to  location.  The  name  of  the  company,  location  of  the 
insured  property,  number  of  the  trust  account,  amount  and  expiration 
of  the  policy,  are  given.  This  index  keeps  the  insurance  clerk  informed 
of  the  total  risk  carried  in  each  company,  and  the  geographical  dis- 
tribution of  the  insured  properties.  Each  of  these  three  sets  of  cards 
should  be  of  a  different  color  from  the  others,  as  a  matter  of  con- 
venience in  readily  distinguishing  them. 

The  policies  are  stacked  in  upright  files.  There  are  two  main 
divisions,  —  for  policies  covering  properties  owned,  and  properties 
held  as  collateral.  The  arrangement  of  both  divisions  is  first  by  trust 
numbers  and  then  by  properties.  Each  policy  is  kept  in  a  manila 
envelope  4|"  x  9^,"  open  at  the  end.  On  the  envelope  are  indorsed 
the  number  and  name  of  the  trust  account,  the  premises  insured, 
company,  number,  amount,  and  expiration  of  the  policy.  If  collateral 
with  a  mortgage,  the  name  of  the  bondsman  is  also  given.  The 
envelopes  for  policies  owned  may  be  printed  in  black,  and  those  for 
policies  held  as  collateral,  in  red. 

A  slip  giving  a  description  of  each  policy,  and  showing  that  it  has 
been  filed  by  the  insurance  clerk,  is  placed  with  the  real  estate  or 
mortgage  papers. 

A  printed  form  is  used  to  notify  mortgage  borrowers  of  the  expira- 
tion of  collateral  insurance.  This  notification  should  give  the  name 
of  the  mortgagee  to  whom  the  policy  is  to  be  made  payable  in  case 
of  loss. 


CHAPTER  VIII 

INDIVIDUAL  TRUST   DEPARTMENT    (Continued) 
RECEIPT  OF  TRUST   FUNDS 

THE  entire  separation  of  the  affairs  of  the  banking  and  trust 
departments  makes  it  necessary  to  have  separate  trust  department 
receiving  and  paying  tellers.  If  the  trust  department  is  small,  both 
offices  may  be  rilled  by  a  single  individual  and  may  even  be  combined 
with  other  duties. 

All  cash  receipts  of  the  trust  department  pass  through  the  hands 
of  its  receiving  teller  and  are  included  in  his  daily  settlement.  Mort- 
gage interest  and  rents  come  to  him  directly  from  the  payers  and 
tenants,  but  coupons,  interest  and  dividend  checks,  bonds,  and 
other  principal  items  are  received  through  officials  of  the  trust  de- 
partment. Some  of  these  have  to  be  collected  by  messenger,  and 
are  then  turned  over  to  the  receiving  teller.  The  cash  should  in  all 
cases  go  from  the  collector  to  the  receiving  teller,  and  never  be  allowed 
to  pass  through  the  hands  of  the  bookkeeper. 

In  the  banking  department,  the  receiving  teller  enters  the  amount 
of  each  deposit  in  a  pass  book  which  he  returns  to  its  owner,  while 
he  retains  the  deposit  slip.  In  the  trust  department  the  procedure  is 
somewhat  different.  The  bookkeepers  prepare  bills  and  correspond- 
ing credit  slips  for  mortgage  interest,  rents,  etc.  These  credit  slips 
are  passed  in  advance  to  the  receiving  teller  and  are  filed  by  due  dates 
and  names  of  payers,  so  that  the  slips  representing  overdue  items 
always  appear  at  the  front  of  the  teller's  index.  The  bills  are  veri- 
fied when  presented  for  payment.  The  slips  are  stamped  "  paid  "  and 
the  bills  are  receipted  and  returned.  When  collections  are  made  by 
messenger,  bills  are  not  sent  out,  but  the  necessary  credit  slips  are 
prepared  by  the  bookkeepers,  and,  with  the  cash,  are  passed  to  the 
receiving  teller  by  the  collector. 

Coupons  are  cut,  and  notes  and  other  maturing  securities  are  taken 
out  by  the  officer  in  charge  of  the  vault  and  are  deposited  by  him 

184 


INDIVIDUAL  TRUST   DEPARTMENT  185 

with  the  receiving  teller  as  cash  or  for  collection  through  bank.  The 
accompanying  credit  slips  are  prepared  by  the  bookkeepers.  Regis- 
tered interest  and  dividend  checks  which  have  come  by  mail  are 
passed  to  the  teller  with  credit  slips  showing  the  accounts  to  which 
they  belong. 

The  credit  slips  covering  each  of  the  different  kinds  of  receipts 
are  listed  by  the  teller  on  an  adding  machine  or  in  a  scratcher,  and 
are  then  passed  to  the  bookkeepers  for  posting  just  as  is  done  with 
the  deposit  slips  in  the  banking  department.  The  receiving  teller's 
settlement  shows  the  total  of  each  sort  of  receipt  divided  into  income 
and  principal.  Important  and  often  difficult  problems  arise  in  decid- 
ing what  is  principal  and  what  is  income.  The  distinction  is  funda- 
mental and  all  doubtful  cases  should  be  referred  to  the  trust  offi- 
cer, and,  if  necessary,  to  counsel.  If  separate  corporate  trust  and 
individual  trust  departments  are  maintained,  the  settlement  shows 
the  receipts  first  by  departments  and  then  according  to  the  nature 
of  the  item.  The  total  receipts  for  the  day  settle  with  the  cash  on 
hand  and  the  amount  deposited  in  bank. 

The  stamp  used  in  indorsing  checks  for  deposit  shows  that  the 
check  has  been  paid  to  the  trust  department  of  the  company.  In 
states  where  it  is  not  contrary  to  law,  the  trust  department  usually 
deposits  its  funds  to  its  credit  in  an  account  in  the  banking  department. 
In  certain  states,  however,  a  trust  company  is  required  to  deposit  its 
uninvested  trust  funds  in  some  other  financial  institution. 


DISBURSEMENT  OF  TRUST  FUNDS 

In  the  trust  department  all  funds  are  disbursed  by  the  trust  officer 
or  by  the  payment  clerk  to  whom  this  authority  is  delegated.  As 
agent  or  attorney,  the  company  makes  payments  in  accordance  with 
the  directions  received  from  time  to  time  from  the  owner.  As  trustee 
or  executor,  it  is  governed  by  the  terms  of  the  deed  or  will,  subject 
to  the  supervision  or  direction  of  the  court;  as  administrator,  by 
the  intestate  laws  and  orders  of  court. 

The  disbursing  officer  of  the  trust  department  must  be  familiar 
with  the  conditions  of  each  case,  and  this  makes  his  problems  more 
complicated  than  those  of  the  paying  teller  in  the  banking  depart- 
ment, who  before  paying  a  check  has  only  to  know  that  the  signature 


1 86  THE   MODERN   TRUST   COMPANY 

and  indorsements  are  genuine  and  the  bank  balance  sufficient. 
Sometimes  an  opinion  of  counsel  should  be  obtained  or  a  special 
order  of  court  may  be  necessary  as  to  the  right  or  duty  of  the  company 
to  make  disbursement  of  trust  funds.  Sometimes  proof  must  be 
had  that  the  beneficiary  has  complied  with  certain  requirements 
contained  in  the  instrument  creating  the  trust,  and  so  is  properly 
entitled  to  the  payment.  An  annuity,  for  example,  may  have  been 
made  payable  to  an  agent.  No  such  payment  should  be  made  with- 
out satisfactory  evidence  that  the  annuitant  is  alive  at  the  time.  When 
income  payments  are  made,  a  sufficient  sum  must  be  retained  to  cover 
commissions,  taxes,  repairs  to  real  estate  if  any,  and  other  charges 
against  the  estate,  and  the  disbursing  officer  must  use  considerable 
judgment  in  making  provision  for  fixed  or  contingent  liabilities,  at  the 
same  time  satisfying  the  reasonable  demands  or  needs  of  the  bene- 
ficiaries. Payments  may  occasionally  be  made,  even  when  there  is 
no  cash  balance  to  the  credit  of  a  trust  account,  if  such  a  course  is  to 
the  advantage  of  the  estate,  and  the  trust  company  is  protected  against 
loss  by  assets  sufficient  to  cover  the  overdraft.  This  is  often  done 
to  settle  debts,  provide  for  funeral  expenses,  pay  taxes,  or  make  rein- 
vestments when  securities  are  about  to  mature.  Interest  is  charged 
on  all  debit  balances. 

A  card  index  arranged  as  to  years,  months,  and  days  serves  as 
a  guide  in  making  disbursements.  Under  each  date  the  cards  are 
indexed  alphabetically  by  the  names  of  the  accounts.  When  a 
regularly  recurring  payment  is  made,  the  card  is  moved  to  the  corre- 
sponding distribution  date  of  the  next  year.  This  index  covers  income 
payments,  annuities,  and  other  charges  against  trust  estates,  such  as 
interest  and  principal  of  mortgages,  taxes,  etc.  For  regular  income 
payments,  standing  orders  are  usually  filed,  directing  that  they  shall 
be  remitted  by  mail  or  placed  to  the  credit  of  the  beneficiary's  deposit 
account  in  the  banking  department  or  with  some  other  company. 
Those  who  prefer  to  collect  income  in  person  are  paid  by  check, 
after  establishing  their  identity. 

Before  any  payment  is  made,  a  charge  slip  is  prepared,  and  signed 
by  the  officer  authorizing  the  disbursement,  which  shows  the  account 
charged,  the  payee,  and  the  details  of  the  payment.  A  check  or 
voucher  is  then  filled  out,  and  signed  by  the  proper  officer  or  officers. 
The  check  should  bear  on  its  face  the  words  "trust  funds"  and 


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1 88  THE   MODERN   TRUST   COMPANY 

should  be  so  drawn  that  the  indorsement  will  serve  as  a  receipt.  In 
the  case  of  repairs  to  real  estate,  the  bill  takes  the  place  of  a  charge 
slip.1 

When  the  accounts  of  executors  and  trustees  come  up  for  audit, 
vouchers  are  required  by  the  court  covering  all  disbursements. 
These  receipts  are  either  filed  with  the  account  or  presented  if 
called  for.  In  parting  with  trust  assets  other  than  cash,  an  order  is 
signed  by  the  proper  officer,  authorizing  the  withdrawal  from  the 
vault  and  delivery  of  the  securities.  A  receipt  or  release  is  taken 
when  the  securities  are  delivered.  When  legacies  are  paid  prior 
to  final  accounting,  receipts  or  releases  are  filed  or  presented  in  the 
same  manner  as  receipts  for  other  disbursements.  When  legacies 
are  paid  after  final  audit  of  the  account  in  accordance  with  the 
court's  adjudication,  the  receipts  or  releases  of  legatees  are  some- 
times filed  with  the  clerk  of  the  court,  thus  completing  the  record  of 
the  settlement  of  the  estate. 

The  daily  settlement  of  trust  disbursements  shows  the  total  of 
the  charge  slips,  separated  according  to  the  principal  and  income 
payments,  and  this  should  agree  with  the  total  of  checks  issued  as 
shown  by  the  stubs.  The  balance  in  bank  and  the  cash  in  possession 
of  the  trust  department  receiving  teller  represent  the  uninvested  trust 
funds  at  the  close  of  business  and  agree  with  the  amount  shown  by 
the  general  ledger.  The  bank  account  of  the  trust  department  should 
be  settled  weekly,  and  reconciled  with  the  check  stubs  or  whatever 
other  record  is  kept  of  trust  checks  issued. 

RECORD   OF   INDIVIDUAL  TRUSTS 

When  securities  are  received  for  trust  accounts,  a  duplicate  of  the 
receipt  is  filed  for  reference,  and  from  it  a  description  of  the  items  is 
at  once  transcribed  into  an  accession  book  called  the  record  of  trust 
securities  received.  This  book  contains  a  series  of  parallel  columns, 
showing  the  number  and  name  of  the  account,  description  and  value 
of  the  security,  when  and  by  whom  received,  by  whom  entries  cover- 
ing the  item  were  made  in  the  proper  books,  when  and  by  whom 
the  securities  were  finally  deposited  in  the  vault,  and  a  last  column 
to  be  initialled  by  the  controller  after  all  the  proper  entries  have  been 
made  and  the  security  has  been  put  away.  Each  clerk  upon  making 

1  Seep.  181. 


RECORD  OF  TRUST  SECURITIES  RECEIVED 


Date 


TRUST 


Bonds 


Appraised 
Value 


RECORD  OP  TRUST  SECURITIES  RECEIVED 


REAL  ESTATE 


DEPOSITED  JN  V 


Examined 
by 

Controller. 


RECORD  OV  TRUST  SECURITIES  DELIVERED 


INDIVIDUAL  TRUST  DEPARTMENT  189 

the  entries  for  which  he  is  responsible  places  his  initials  in  the  proper 
column.  This  record  is  also  used  as  a  receipt  book,  and  indicates  in 
whose  hands  securities  are  and  how  far  the  records  have  been  com- 
pleted. Cash  received  is  at  once  entered  in  the  cash  book,  and  does 
not  appear  in  the  accession  book.  The  accession  book  may  be  so 
ruled  that  every  kind  of  security  can  be  entered  in  it,  or  if  the  company 
transacts  a  large  business  it  may  be  divided  into  two  books,  one  for 
stocks  and  bonds,  and  another  for  real  estate  and  mortgages;  or  if 
desirable  it  may  be  still  further  subdivided.  Slips  are  sometimes  used 
to  report  new  securities,  but  a  bound  book  is  preferable.  The  value 
of  the  accession  book  lies  in  its  calling  the  attention  of  the  clerks 
to  each  possible  place  where  entries  should  be  made.  The  initials 
in  the  various  columns  place  responsibility  for  the  correctness  of  the 
entries,  and  the  examination  by  the  controller  detects  any  omissions. 

The  number  and  name  of  each  new  trust  account,  and  the  capacity 
in  which  the  company  acts,  should  be  entered  in  the  record  of  trust 
securities  received  when  the  account  is  opened. 

The  record  of  trust  securities  delivered  is  a  companion  book  to 
the  record  of  trust  securities  received.  An  entry  is  made  in  the  de- 
livery book  when  securities  are  sold  or  delivered,  when  any  principal 
payment  is  received,  or  when  a  trust  account  is  closed.  The  book 
can  either  contain  all  deliveries  or,  like  the  accession  book,  it  can  be 
divided  into  separate  volumes  for  the  different  classes  of  securities. 

The  record  of  individual  trusts  is  the  most  important  book  of 
reference  of  the  trust  department.  Supplemented  by  the  trust  ledgers, 
it  gives  the  present  status  of  each  trust  account  and  forms  a  history 
of  all  past  transactions.  It  should  not  be  kept  by  the  officer  who  has 
charge  of  the  securities.  For  such  constantly  changing  records  as 
those  of  trust  assets,  a  loose-leaf  book  has  many  advantages.  Space 
is  saved,  as  extra  pages  are  inserted  only  as  needed  and  dead  matter 
is  transferred  to  separate  binders.  Accounts  can  always  be  kept  in 
their  numerical  order;  securities  can  be  classified,  and  where  there 
have  been  many  changes  single  pages  can  be  rewritten  at  any  time, 
without  the  necessity  of  copying  the  whole  book..  Sheets  n"  long 
by  12"  wide  (exclusive  of  the  blank  binding  space),  kept  in  locked 
binders,  have  been  found  well  adapted  to  the  purpose.  Each  trust 
account  has  an  abstract  sheet  and  as  many  of  the  following  sheets  as 
are  needed  to  record  the  securities  it  holds. 


THE  MODERN   TRUST   COMPANY 

Sheet  A.  —  At  the  top  the  word  "abstract"  is  printed,  and  space 
is  left  for  the  title  of  the  account  and  its  accession  number.  The 
remainder  of  the  page  is  devoted,  as  its  name  implies,  to  a  brief  de- 
scription of  the  account.  The  nature  of  the  appointment  and  of  the 
estate,  the  disposition  of  income,  authority  as  to  investments,  nature 
and  amount  of  debts  and  encumbrances,  notice  of  assignments,  rate 
of  compensation,  exact  title  in  which  securities  are  registered,  power 
to  sell,  if  any,  and  the  name  and  address  of  counsel  are  shown,  to- 
gether with  the  names  of  the  beneficiaries  and  miscellaneous  data. 
The  sheet  is  divided  into  three  columns,  and  the  headings  are  printed 
far  enough  apart  to  leave  room  for  the  various  entries.  The  back 
of  the  sheet  is  also  ruled,  and  can  be  used  in  recording  further 
information. 

Sheet  B.  —  "Coupon  bonds"  is  printed  at  the  top  of  the  sheet, 
followed  by  spaces  for  the  name  and  number  of  the  account.  Both 
sides  of  the  sheet  are  ruled  and  printed.  Every  fourth  line  is  ruled 
more  heavily  than  the  rest.  This  divides  the  page  into  spaces  of 
four  lines,  and  each  security  is  entered  in  a  separate  space  even  though 
it  does  not  fill  it  entirely.  At  the  left-hand  side  is  a  date  column,  a 
column  for  tick  marks,  then  one,  3$"  wide,  for  the  description  of  the 
security  including  bond  numbers,  columns  for  the  date  of  maturity 
and  interest  periods,  cash  columns  for  the  par  value  and  the  appraised 
or  cost  value,  and,  lastly,  a  wider  column  for  payments  and  remarks. 

Sheet  C.  —  Stocks.  Columns  are  ruled  for  date,  tick  marks, 
number  of  shares,  description,  certificate  numbers,  dividends  payable, 
par  value,  appraised  or  cost  value,  and  payments  and  remarks.  Every 
second  cross  line  is  heavier,  a  space  of  two  lines  being  devoted  to  each 
security. 

Sheet  D.  —  Notes  and  miscellaneous  securities.  Columns  for 
date,  tick  marks,  description,  par  value,  appraised  or  cost  value, 
and  payments  and  remarks.  The  cross  rulings  allow  three  lines  for 
each  security. 

Sheet  E.  —  Registered  loans.  This  page  is  like  sheet  B  in  every 
respect  except  the  title. 

Sheet  F.  —  Mortgages.  Columns  for  the  date,  tick  marks, 
premises,  bond  of,  maturity,  interest  rate  and  dates  payable,  par 
value,  appraised  or  cost  value,  and  payments  and  remarks.  A  space 
of  four  lines  is  provided  for  each  mortgage. 


8HBBT  NO.                                                                     ABSTRACT                                              NAME 

Appointment 

Authority  as  to  Investments 

Under  will  of 

Late  of 

Who  died                                  Will  dated 

Probated                                    Registered 

In                                     County  Will  Book  Vol         pape 

By          Court              at  No.           Term                    19 

DeedoiTrnst 

1  Dated 

Debts  and  Ineurubpances 

Agreement  dated 

Notice  of  Assignments 

Nature  of  Estate 

Disposition  of  Income 

Compensation 

Securities  to  be  Registered 

Power  to  Sell 

Counsel 

I 

NO 


Ceatui  que  Trustent 


and  Beneficiaries 


Other  Data 


I 


191 


I 


192 


193 


194 


195 


196 


INDIVIDUAL  TRUST  DEPARTMENT  197 

Sheet  G.  —  Real  estate.  The  date,  description  of  the  property 
and  of  encumbrances,  and  the  appraised  or  cost  value  are  shown,  with 
a  final  column  for  payments  or  remarks.  Six  lines  are  allowed  for 
each  property. 

Other  sheets  can  be  provided  as  needed  for  securities  not  included 
in  the  above  list.  Thus,  where  real  estate  loans  in  the  form  of 
ground  rents  are  held  in  any  number,  a  sheet  should  be  used,  ruled 
to  show  the  date,  premises,  whether  redeemable  or  irredeemable, 
rent  payable,  rent  per  annum,  par  value,  appraised  or  cost  value, 
and  payments  or  remarks. 

Additional  purchases  of  securities  already  held  are  entered  in  the 
same  space  as  the  original  investment,  thus  obviating  the  necessity  of 
rewriting  the  title  of  the  bond  or  stock.  When  one  space  is  not  enough 
for  the  description  of  an  investment  more  are  filled.  Both  sides  of  the 
sheets  are  used,  and  as  many  sheets  of  each  kind  as  are  needed. 

The  will,  deed,  or  other  authority  under  which  the  account  is 
received,  the  record  of  securities  received  and  the  securities  them- 
selves, are  the  sources  from  which  entries  are  made  in  the  record  of 
individual  trusts.  The  par  values  are  verified  by  actual  comparison 
with  the  securities,  and  the  total  of  the  appraised  or  cost  values  of 
each  account  must  settle  with  the  total  investments  of  the  estate  shown 
in  the  individual  trust  ledger.  The  total  appraised  or  cost  value  of 
all  investments  of  each  sort  held,  settles  with  the  corresponding  general 
ledger  account.  All  securities  sold  or  distributed  are  ruled  out, 
and  the  particulars  are  noted  on  the  sheets  in  the  space  provided  for 
this  purpose.  When  all  the  securities  on  a  sheet  are  ruled  off,  the 
sheet  is  taken  out  and  filed  in  a  transfer  binder.  When  an  account 
is  closed,  a  closing  entry  is  made  on  the  abstract  sheet,  the  sheets 
are  stamped  "  closed,"  and  are  transferred  in  the  same  way.  The 
record  of  securities  delivered  is  the  authority  for  making  these  entries. 
If  a  page  has  to  be  rewritten,  it  is  not  destroyed,  but  is  marked 
" rewritten,"  and  is  filed  with  the  others  in  the  transfer  binder. 

A  card  index  arranged  alphabetically,  and  giving  both  the  name 
and  accession  number  of  each  trust,  makes  it  easy  to  refer  to  any 
account  in  the  record  of  individual  trusts.  It  also  serves  as  an  index 
to  all  valuable  papers,  not  securities,  which  may  most  conveniently  be 
kept  together  under  trust  numbers  in  vertical  filing  cases,  in  a  vault  or 
fireproof  case.  The  index  of  trusts  is  divided  into  open  and  closed 


1 98  THE   MODERN  TRUST  COMPANY 

accounts.     When  an  account  is  closed  the  card  is  stamped  "  closed," 
and  is  transferred  from  one  section  to  the  other. 

In  addition  to  having  in  the  record  of  individual  trusts  an  abstract 
of  the  authority  under  which  the  company  acts,  it  is  well  to  have  com- 
plete copies  of  these  documents  in  accessible  form.  For  this  purpose 
a  typewritten  copy  of  each  will,  deed  of  trust,  agreement,  power  of 
attorney,  or  other  document  is  made  when  the  account  is  received. 
These  copies  are  kept  flat  in  binders,  in  order  of  the  accession  numbers 
of  the  accounts.  When  an  account  is  closed,  the  copy  of  the  will  or 
other  authority  is  removed  from  the  binder,  and  is  filed  with  the 
estate  papers.  In  this  way,  live  matter  only  is  contained  in  the 
binder. 

INDIVIDUAL  TRUST  LEDGER 

Other  elements  besides  cash  enter  into  the  individual  trust  ac- 
counts, and  consequently  a  different  form  of  ledger  from  that  used 
in  the  banking  department  is  required.  This  ledger  is  preferably  a 
loose-leaf  book.  The  accounts  are  kept  in  alphabetical  order.  The 
trust  number  is  used  throughout  as  an  additional  safeguard  in  placing 
the  items.  At  the  top  of  the  page  appear  the  name  and  number  of  the 
account,  and  the  rate  of  compensation.  When  it  is  necessary  to 
separate  accounts  of  proceeds  of  sale  of  real  estate  from  accounts  of 
personal  property,  two  ledger  sheets  may  be  used  for  one  trust  so  as 
to  simplify  the  preparation  of  the  accounts  to  be  filed  with  the  court. 
The  sheets  are  ruled  on  both  sides.  At  the  left  of  the  sheet  are  date 
columns  and  a  description  column.  This  column  should  be  wide 
enough  for  as  full  an  explanation  of  each  item  as  needs  to  be  given 
in  accounting  to  court  or  to  the  beneficiary,  and  each  entry  should 
be  so  complete  that  the  ledger  sheet  can  be  handed  to  an  intelligent 
stenographer  to  prepare  court  accounts  or  statements  from  it.  Next 
comes  a  narrow  column  for  the  check  or  voucher  number,  which 
is  useful  in  identifying  checks  when  needed  for  reference  or  to  be 
produced  in  court.  The  rest  of  the  page  is  filled  by  cash  columns 
under  the  three  main  headings  of  income,  principal,  and  investments. 

In  the  " income"  section  under  debits  are  shown  payments  to  cred- 
itors and  beneficiaries,  taxes,  repairs,  interest  on  overdrafts,  commis- 
sions, and  all  other  distributions  chargeable  to  income.  Under  "gross 
credits,"  all  income  receipts  are  entered.  The  next  columns  are 


Compensation 


.OF    ESTATE  OF. 


INDIVIDUAL 


Trust  No.. 
Sheet  No.. 


INVESTMENTS 


.Net  Credit 


Balance 


Debit 


Balance 


Credit 


ST  LEDGER 


INDIVIDUAL  TRUST  DEPARTMENT  199 

headed  commissions  and  net  credits.  The  gross  amount  of  each 
income  receipt  is  thus  shown,  followed  by  the  commission  on  it,  and 
the  net  sum  for  distribution  after  deduction  of  the  trust  company's 
charge.  The  commissions  and  net  credits  settle  with  the  gross 
credits.  By  computing  the  commissions  on  income  at  once  in  this 
way,  the  danger  of  over-payments  of  income  to  beneficiaries  is  avoided 
and  it  becomes  unnecessary  to  pick  out  the  items  later,  so  as  to  com- 
pute the  amount  of  compensation  on  the  total.  The  balance  column, 
which  completes  the  income  section,  shows  the  difference  between 
the  debits  and  gross  credits ;  in  other  words,  the  balance  of  income 
on  hand  for  distribution  and  payment  of  commissions.  Debit  bal- 
ances are  shown  in  red. 

The  "principal"  section  consists  of  debit  and  credit  columns,  and 
a  balance  column.  The  credit  column  shows  the  corpus  of  the  estate 
at  the  opening  of  the  account,  and  all  subsequent  accretions.  The 
debit  column  shows  all  losses  and  amounts  paid  out  in  distribution. 
The  balance  column  gives  the  difference  between  the  two,  which  is 
the  amount  of  the  corpus  of  the  estate  for  which  the  trust  company 
is  liable.  There  is  no  separate  column  for  commissions  on  principal, 
as  these  items  do  not  appear  often  enough  to  make  it  necessary. 

Under  "  investments  "  are  columns  for  debits,  credits,  and  balance. 
The  debit  column  shows  that  part  of  the  corpus  of  the  estate  which  is 
invested  at  the  opening  of  the  account,  and  the  cost  of  all  subsequent 
purchases  of  securities.  The  credit  column  gives  the  amount  realized 
from  sales  of  investments,  and  the  amount  of  investments  distributed  in 
kind.  The  balance  column  shows  the  amount  of  investments  on  hand. 

The  amount  of  uninvested  principal  is  found  by  deducting  the 
debit  balance  in  the  investment  section  from  the  credit  balance  in 
the  principal  section.  The  total  amount  of  cash  on  hand  belonging 
to  the  estate  is  composed  of  the  uninvested  principal,  and  the  balance 
in  the  income  section.  If  the  estate  is  over-invested,  or  if  the  income 
receipts  have  been  anticipated  and  paid  out,  the  cash  balances  may 
show  an  overdraft. 

Ledger  postings  are  made  from  the  credit  and  charge  slips  described 
under  receipt  and  disbursement  of  trust  funds.  The  credits  and 
charges  are  also  listed  in  scratchers.  The  totals  of  the  individual 
trust  ledgers  settle  with  the  controlling  accounts  in  the  trust  general 
ledger. 


200  THE   MODERN  TRUST   COMPANY 

Daily  balance  and  interest  slips  are  used,  similar  to  those  in  the 
banking  department,1  except  that  they  cover  a  three  months'  period, 
three  columns  showing  principal  balances  and  three  income.  Cal- 
culations of  the  interest  charged  or  allowed  are  made  on  daily  balances 
as  in  the  case  of  deposit  accounts.2  Each  day's  changes  are  made 
on  the  slips  from  the  scratchers,  and  the  resulting  figures  are  called 
back  to  the  ledgers  to  verify  the  ledger  postings.  In  accounts  where 
principal  balances  are  not  for  investment,  this  fact  is  noted  on  the 
slip.  Each  day,  as  the  changes  are  made,  blotters  are  inserted  in 
the  files  of  balance  slips,  different  colors  being  used  to  denote  principal 
and  income  items.  At  the  time  of  verification  with  the  ledgers,  the 
blotters  marking  income  changes  are  taken  out,  while  those  repre- 
senting changes  in  principal  balances  are  moved  so  as  to  show  at 
the  opposite  end  or  side  of  the  file,  which  is  then  used  in  making  the 
daily  changes  on  the  index  of  uninvested  principal  balances.3 

The  accounts  in  the  individual  trust  ledger  are  closed  at  fixed 
intervals  when  statements  are  rendered  the  beneficiaries,  or  when 
accounting  is  made  to  court.  Trial  balances  should  be  taken  off  at 
least  once  a  month.  On  the  trial  balance  of  the  individual  trust 
ledger,  cash  is  the  balancing  account,  being  the  difference  between  the 
principal  and  investment  section  plus  the  balance  in  the  income  section. 

Accounts  are  filed  in  court  in  accordance  with  legal  requirements. 
The  books  of  the  trust  department  should  be  so  kept  that  such  ac- 
counts may  be  merely  a  transcript  of  the  ledger.  The  courts  usually 
prescribe  the  form  in  which  accounts  shall  be  filed,  for  the  sake  of 
uniformity  often  fixing  even  such  details  as  the  size  of  the  sheet  to 
be  used.  As  accounts  may  cover  long  periods,  it  is  well  to  have  the 
transcripts  kept  up  to  date,  so  that  only  the  work  of  a  short  period 
will  have  to  be  added  to  them  before  the  account  is  filed.  In  this  way, 
lengthy  accounts  can  be  prepared  in  slack  times  and  kept  ready  for 
immediate  filing,  without  interfering  with  the  current  work  of  the 
department. 

Statements  should  be  sent  at  least  once  a  year  to  the  clients  of 
the  trust  department;  when  possible,  a  semi-annual  account  is  to  be 
preferred.  As  most  statements  are  sent  out  at  fixed  dates  which  can 
be  determined  in  advance,  they  should  be  prepared  beforehand,  so 
that  only  the  last  items  have  to  be  added  at  the  close  of  the  period. 

1  See  p.  69.  2  See  p.  70.  8  See  p.  207. 


INDIVIDUAL  TRUST  DEPARTMENT  2OI 

Prompt  rendering  of  such  statements  is  always  appreciated  by  the 
recipient. 

TRUST  GENERAL  LEDGER 

In  the  trust  department  a  double  entry  system  of  accounts  is  used, 
which  is  complete  in  itself  and  independent  of  the  general  books  of  the 
company.  Its  connection  is  only  shown  by  the  item  of  uninvested 
trust  funds,  when  these  are  deposited  with  the  banking  department, 
and  by  the  earnings  from  the  business  which  are  transferred  by  cash 
entries,  at  fixed  periods,  to  the  company's  income  account,  and  so 
appear  in  its  profit  and  loss  account. 

Whether  there  be  a  single  trust  department  or  a  corporate  and  an 
individual  trust  department,  each  keeping  separate  sets  of  auxiliary 
books,  the  main  threads  of  the  trust  business  are  gathered  together 
in  a  single  general  ledger.  A  bound  volume  with  the  ordinary  ledger 
ruling  may  be  used.  In  its  simplest  form,  the  trust  general  ledger 
contains  the  following  accounts :  — 

Principal.  —  This  account  shows  the  total  corpus  or  principal 
sum,  invested  and  uninvested,  of  the  estates  in  the  trust  department 
at  appraised  or  cost  values.  It  may  appear  in  the  general  ledger 
as  a  single  account  or  divided  according  to  the  capacities  in  which 
the  company  acts. 

Income.  —  Here  the  total  income  to  the  credit  of  the  various  trust 
accounts  is  shown,  either  in  a  single  account  or  separated  as  in  the 
case  of  principal. 

Investments.  —  This  account  shows  the  total  of  all  invested  trust 
principal  with  which  the  company  charges  itself.  The  difference 
between  the  principal  and  investment  accounts  represents  the  amount 
of  uninvested  principal.  Cost  or  appraised  values  are  shown.  A 
single  account  may  be  used,  although  separate  accounts  for  the  various 
classes  of  investments  are  preferable,  and  if  thought  wise,  each  one  can 
be  subdivided  according  to  the  capacity  in  which  the  company  acts. 

Cash. — This  account  shows  the  total  amount  of  cash  with  which  the 
company  charges  itself.  It  includes  income  and  principal  moneys  await- 
ing distribution,  principal  for  investment,  and  accrued  commissions. 

Commissions.  —  To  this  account  are  credited  the  various  items 
of  commissions  as  they  accrue.  At  fixed  periods,  usually  once  a 
month,  it  is  closed  into  the  earnings  of  the  company  by  a  cash  entry. 


202 


THE  MODERN   TRUST  COMPANY 


The  general  ledger  balance  sheet  containing  the  above  accounts  is 
as  follows :  — 

TRUST  DEPARTMENT  GENERAL  LEDGER  BALANCES 

Debits  Credits 

Cash $500,000      Principal $4,800,000 

4,500,000      Income 190,000 

.     .    .  10,000 


Investments 


Income 
Commissions 


$5,000,000 


$5,000,000 


If  the  corporate  and  individual  trust  departments  are  separate, 
the  same  balance  sheet  appears  in  the  following  form :  — 

TRUST  DEPARTMENT  GENERAL  LEDGER  BALANCES 


Cash  .    .    . 

Debits 

$500,000      Principal  : 

Credits 

Investments  : 
Corporate, 
Individual, 

$1,700,000 
2,800,000 

Corporate, 
Individual, 
4,500,000      Income  : 

$1,800,000 
3,000,000 

$4,800,000 

Corporate, 
Individual, 

$90,000 
100,000 

190,000 

Commissions  : 
Corporate, 
Individual, 

$5,000 
5,000 

10,000 

$5,000,000 


$5,000,000 


If  all  trust  business  is  cared  for  in  a  single  department,  but 
a  more  detailed  balance  sheet  is  desired,  the  general  ledger  accounts 
shown  above  are  divided  according  to  the  capacities  in  which  the 
company  acts  and  the  kinds  of  investments  held. 

TRUST  DEPARTMENT  GENERAL  LEDGER  BALANCES 


Debits 

Cash $500,000 

Investments : 

Coupon  bonds,  $1,000,000 

Stocks    .     .     .       500,000 

Notes  and  mis- 


eel,  see's  . 
Regd.  loans 
Mortgages  . 
Real  estate 


10,000 
1,500,000 
1,000,000 
490,000  4,500,000 


$5,000,000 


Credits 
Principal : 

As  executor,      $500,000 
As  administra- 
tor     ...    300,000 
As  guardian    .     100,000 
As  trustee  un- 
der will  .     .  2,000,000 
As  trustee  un- 
der deed      .  1,500,000 
As  attorney    .    400,000    $4,800,000 
Income      .     .     .  190,000 

Commissions      .  10,000 

$5,000,000 


INDIVIDUAL  TRUST  DEPARTMENT  203 

The  income  and  commission  accounts  can  be  divided  to  corre- 
spond with  the  principal  account.  Each  class  of  investments  can  also 
be  divided  according  to  the  capacity  in  which  the  company  acts. 
Where  there  are  separate  corporate  and  individual  trust  departments, 
the  same  subdivisions  can  be  made  under  each  department.  The 
number  of  accounts  in  the  general  ledger  and  the  consequent  amount 
of  detail  shown  on  the  balance  sheet  depend  on  the  size  of  the  business 
and  the  information  required  by  the  officers.  For  a  small  company, 
the  simplest  form  will  suffice.  A  large  business  requires  a  more 
detailed  analysis  of  the  general  ledger  accounts. 

The  trust  department  general  ledger  is  closed  at  the  end  of  the 
fiscal  year  by  bringing  down  the  balance  of  each  account  before  com- 
mencing the  business  of  the  new  period.  The  process  is  simple, 
as  the  company's  expenses  are  shown  in  its  general  books,  and  com- 
missions is  the  only  account  in  the  trust  department  general  ledger 
to  be  transferred  to  earnings. 

In  the  trust  general  cash  book,  if  the  business  is  settled  on  a  daily 
basis,  separate  columns  for  income,  principal,  and  investments  appear 
on  both  debit  and  credit  pages.  When  securities  are  sold,  paid  off, 
or  delivered,  the  original  cost  is  charged  to  investments,  and  any 
profit  or  loss  resulting  from  the  transaction  is  either  credited  or  charged 
to  principal.  When  securities  are  bought  and  carried  at  cost,  the 
amount  paid  is  credited  to  investments.  The  data  for  each  entry 
are  obtained  from  the  charge  or  credit  slip,  which  shows  the  component 
parts  of  the  item  and  the  accounts  into  which  it  is  to  go.  The  day's 
total  of  each  class  of  receipts  and  expenditures  is  posted  from  the 
cash  book  to  the  general  ledger. 

If  the  business  is  settled  on  a  monthly  basis,  the  cash  book  should 
be  ruled  with  a  separate  column  for  each  of  the  active  general  ledger 
accounts,  so  that  the  totals  can  be  posted  instead  of  the  individual 
items.  A  miscellaneous  column  is  used  for  the  inactive  accounts, 
and  each  item  entered  in  it  is  posted  separately. 

The  journal  is  ruled  with  two  columns  for  each  active  general 
ledger  account  and  two  for  miscellaneous  items.  From  the  columns 
for  active  accounts,  postings  to  the  general  ledger  are  made  by 
totals,  while  from  the  miscellaneous  section  each  item  is  posted 
separately. 

A  trust  department  comparative  daily  balance  sheet  is  prepared 


204  THE  MODERN  TRUST  COMPANY 

for  the  use  of  the  officers  of  the  company.1  At  the  left-hand  side  of 
the  sheet  appear  the  titles  of  the  various  accounts  followed  by  cash 
columns  for  yesterday's  and  to-day's  balances  and  increases  and 
decreases  to-day.  The  assets  appear  at  the  top  of  the  page,  divided 
according  to  the  arrangement  of  the  accounts  in  the  general  ledger, 
to  show  the  various  sorts  of  investments  held.  The  liabilities  follow, 
separated  into  principal  held  in  various  capacities,  income,  and  com- 
missions. The  number  and  arrangement  of  the  items  is  determined 
by  the  accounts  carried  in  the  general  ledger.  Totals  of  both  assets 
and  liabilities  are  shown,  and  net  changes  in  each,  in  order  to  balance 
the  footings. 

A  comparative  monthly  balance  sheet  in  the  same  form,  but  printed 
on  a  different  colored  paper,  is  used  to  show  the  changes  in  the  busi- 
ness from  month  to  month. 

A  monthly  statement  should  also  be  made  of  the  number  of  trust 
accounts  opened  and  closed,  and  the  resulting  balance  of  open  accounts 
at  the  end  of  the  month.  The  lists  of  accounts  opened  and  closed 
should  give  the  names,  with  a  short  description  of  the  size  and 
character  of  each  estate,  and  the  capacity  in  which  the  company  acts. 

INVESTMENTS 

The  trustee's  duty  in  investing  the  funds  is  a  double  one ;  namely, 
to  invest  them  securely  so  that  the  principal  shall  be  preserved  intact, 
and  to  invest  them  as  productively  as  possible  under  his  powers,  so 
that  they  shall  yield  the  best  rate  of  interest  obtainable  for  the  benefit 
of  the  person  or  persons  entitled  to  the  income.  He  must  hold  the 
scales  evenly,  regarding  scrupulously  his  duties  to  all  beneficiaries. 
The  popular  idea  that  security  is  the  only  consideration  is  erroneous, 
as  the  trustee  is  equally  bound  to  invest  the  funds  as  profitably 
as  possible  and  cannot  neglect  one  duty  more  than  the  other.2  The 
mistaken  impression  that  the  corporate  trustee,  even  more  than  the 
individual,  is  mindful  only  of  the  safety  of  the  principal  and  en- 
tirely loses  sight  of  the  question  of  income,  has  arisen  from  the  re- 
strictions as  to  investments  imposed  by  law,  and  frequently  also  by 
the  will  or  trust  deed,  and  from  the  fact  that  the  individual  executor 
or  trustee,  rightly  or  wrongly,  sometimes  assumes  risks  and  personal 

1  See  p.  241  for  description  of  a  similar  balance  sheet. 

2  See  "  A  Trustee's  Handbook,"  by  Augustus  Peabody  Loring,  p.  95. 


INDIVIDUAL  TRUST  DEPARTMENT  205 

liability  which  the  proper  rules  of  a  trust  company  would  not  permit 
it  to  assume. 

Investments  for  attorney  accounts  are  made  in  accordance  with  the 
directions  of  the  owners  or  subject  to  their  approval.  The  executor 
or  trustee  is  governed,  as  to  the  kinds  of  investments,  by  the  directions 
of  the  will  or  deed  of  trust.  This  may  require  the  purchase  of  "legal 
investments"  only,  or  state  that  the  trustee  is  not  to  be  confined 
to  securities  prescribed  by  law,  or  give  specific  directions  as  to  the 
classes  of  securities  which  are  to  be  bought.  The  terms  of  such 
documents  are  always  strictly  construed  by  the  courts;  if  no 
directions  are  given,  the  trustee  is  expected  to  buy  only  "legal" 
securities,  and  when  he  exceeds  his  powers  he  is  held  responsible 
for  any  loss.  Administrators  and  guardians  without  broader  powers 
given  by  will  are  obliged  to  invest,  except  at  their  personal  risk,  in 
such  securities  as  are  sanctioned  by  law  or  directed  by  the  court. 

Some  states  prescribe  by  statute  the  securities  in  which  a  trustee 
may  invest.  "Where  there  is  no  statute  or  decision  of  the  highest 
court  fixing  the  class  of  securities  in  which  a  trustee  may  invest,  he 
can  safely  follow  the  rule  prescribed  for  the  investment  of  the  funds 
of  savings  banks."  l  In  general,  city,  state,  and  United  States  bonds, 
and  first  mortgages  secured  on  improved  real  estate  with  ample 
margin,  are  among  the  investments  sanctioned  by  law.  As  to  real 
estate,  stocks,  and  first  mortgage  bonds  of  railroad,  manufacturing, 
and  other  corporations,  the  practice  varies  in  the  different  states. 
Loans  on  personal  property,  second  mortgages,  and  other  investments 
subject  to  prior  liens  or  of  a  speculative  character  are  excluded.  All 
investments  must  possess  intrinsic  value;  the  courts  hold  trustees 
liable  for  any  losses  from  speculative  risks  —  but  any  gains  accrue  to 
the  trust  estate. 

Executors  and  trustees  are  often  permitted,  or  directed,  to  retain 
the  securities  in  which  an  estate  is  invested  on  coming  into  their  hands, 
but  in  reinvesting  are  confined  to  other  classes  of  securities.  One  of 
the  first  duties  of  a  trustee  on  assuming  the  charge  of  an  estate  is  to 
make  a  careful  examination  of  the  securities  and,  subject  to  the  direc- 
tion of  the  instrument  creating  the  trust,  to  dispose  of  such  as  are  im- 
proper, unsafe,  or  unproductive.  Investments  should  not  be  changed 
unnecessarily,  but  as  the  best  interests  of  the  fund  demand.  It  is 

1  See  "  A  Trustee's  Handbook,"  by  Augustus  Peabody  Loring,  pp.  96,  100  ct  seq. 


206  THE  MODERN  TRUST  COMPANY 

generally  unwise  to  invest  an  entire  fund  in  any  one  security.  In 
settling  an  estate,  it  may  be  necessary  to  convert  it  into  cash  in  order 
to  pay  debts  and  legacies,  hence  an  executor  is  not  required  to  keep 
an  estate  as  closely  invested  as  is  a  trustee  who  must  hold  it  for  the 
support  of  a  beneficiary. 

The  making  of  investments  for  the  trust  department  is  one  of  the 
most  important  duties  of  the  general  officers  of  the  company,  in  which 
they  are  assisted  by  the  directors  and  guided  by  expert  advice  based 
on  thorough  investigation.  They  should  be  kept  informed  of  the 
amount  of  balances  for  investment  and  of  securities  about  to  mature, 
and  should  be  in  a  position  to  take  advantage  of  favorable  market 
conditions. 

The  practice  of  carrying  in  the  company's  possession  securities 
which  are  available  for  transfer  to  trust  accounts,  has  much  in  its 
favor :  a  client  can  be  shown  a  list  of  securities  immediately  available, 
and  maturing  obligations  can  be  at  once  replaced.  A  word  of  caution 
is,  however,  necessary.  Unmarketable  securities  must  never  be  found 
in  such  an  account,  nor  be  sold  to  trust  estates  when  they  cannot  be 
disposed  of  otherwise  without  loss.  Nor  can  profits  properly  be  made 
through  the  purchase  of  investments  and  their  subsequent  sale  at  ad- 
vanced figures  to  estates  in  the  interest  of  which  the  trust  company 
is  supposed  to  be  acting.  One  large  and  successful  trust  company 
which  maintains  a  department  for  the  purchase  and  sale  of  bonds,  in 
order  to  be  free  from  any  taint  of  suspicion,  invariably  buys  and  sells- 
for  its  trust  estates  through  other  firms,  even  when  it  can  secure  better 
figures  through  its  own  bond  department.  It  must  also  be  remem- 
bered that  when  the  trust  company  owns  securities  and  later  sells 
them  to  its  trust  accounts,  a  greater  moral  responsibility  is  assumed 
than  when  the  investments  are  purchased  in  the  first  instance  for  the 
trust  department  from  outside  sources. 

When  securities  are  bought  at  a  premium  for  trust  accounts,  a 
proportionate  part  of  the  premium  is  sometimes  charged  off  at  each 
interest  period,  so  that  no  loss  to  the  corpus  of  the  estate  will  be  shown 
at  the  maturity  of  the  obligation.  This  is  a  practice  heartily  to  be 
commended.1 

The  securities  are  assigned  to  the  various  trust  accounts  under 
the  direction  of  the  trust  officer.  All  accounts  should  be  kept  as 

1  See  "A  Trustee's  Handbook,"  by  Augustus  Peabody  Loring,  p.  112. 


INDIVIDUAL  TRUST   DEPARTMENT  207 

closely  invested  as  possible.  On  uninvested  trust  cash  deposited 
in  the  trust  company's  banking  department,  a  higher  rate  of 
interest  may  be  allowed  than  on  ordinary  deposit  accounts.  When 
these  funds  are  deposited  elsewhere,  the  same  rate  of  interest  that 
is  received  from  the  depositary  is  credited  to  the  trust  account.  Secu- 
rities representing  the  uninvested  trust  balances  may  be  bought  and 
held  by  the  company  in  order  to  secure  a  larger  return  than  that 
received  from  moneys  on  deposit. 

A  record  should  be  kept  of  the  cash  balances  for  investment  in 
each  account.  This  may  be  a  card  index,  on  which  the  balance  is 
shown  and  an  abstract  of  the  provisions  as  to  investments.  The 
index  can  be  arranged  alphabetically  under  the  names  of  the  trust 
accounts,  or  may  be  divided  according  to  the  size  of  the  balance, 
whether  for  investment  or  not  for  investment,  and  the  character  of 
the  investments  allowed.  If  divided  in  any  of  these  ways,  each 
division  should  be  arranged  alphabetically.  When  securities  are 
engaged  but  not  paid  for,  this  fact  can  be  noted  in  pencil  on  the  card. 
Changes  in  the  balance  of  principal  index  are  made  daily  from  the 
balance  slips  of  the  trust  bookkeepers. 

COMPENSATION 

It  is  difficult  to  do  more  than  fix  an  approximate  scale  of  charges 
for  services  rendered  by  the  trust  department.  A  general  standard 
should,  however,  be  adhered  to,  and  each  client  should  understand 
that  charges  are  based  first  on  the  duties  to  be  performed  by  the  com- 
pany, then  on  the  size  and  character  of  the  estate.  When  a  trust 
company  serves  in  capacities  in  which  its  actions  are  subject  to  review 
by  court,  the  compensation  is  fixed  either  by  statute  or  by  order  or 
decree  of  court.  The  courts  usually  allow  trust  companies  the  same 
compensation  that  would  be  given  to  individuals  acting  in  similar 
capacities,  and  this  may  be. made  the  foundation  of  the  company's 
schedule  of  rates.  When  a  trust  company  and  one  or  more  individ- 
uals act  as  co- executors  or  co-trustees,  the  commissions  may  be  equally 
divided,  or  the  trust  company,  if  it  cares  for  the  securities  and  does 
the  principal  part  of  the  work,  may  receive  the  larger  share  of  the 
commissions.  If  the  estate  of  which  it  is  executor  or  trustee  is  very 
large,  the  court  may  decide  upon  a  commission  smaller  than  that 
usually  allowed. 


208  THE  MODERN   TRUST  COMPANY 

As  agent  and  attorney,  the  commission  charged  for  the  mere 
collection  of  interest  and  dividends  is  less  than  for  taking  care  of 
the  securities  also.  A  larger  commission  is  charged  for  collecting 
rents  than  for  collecting  interest  and  dividends  on  bonds  and  stocks. 
When  acting  as  trustee,  a  commission  is  usually  charged  on  the  in- 
come collected  and  on  the  principal  of  the  personal  property  at  the 
close  of  the  trust.  No  commission  is  charged  for  reinvesting.1  In 
executorships,  a  commission  is  charged  on  both  principal  and  income. 
In  Pennsylvania,  if  the  same  person  is  executor  and  also  trustee, 
he  is  not  entitled  to  commissions  on  principal  in  the  latter  capacity. 
When  a  trust  company  is  to  be  named  as  executor  or  trustee  under 
a  will,  an  agreement  as  to  charges  is  often  made  with  the  testator. 
Under  such  circumstances,  the  company's  officers  can  be  consulted 
with  perfect  propriety  and  in  entire  confidence,  and  other  matters 
besides  that  of  compensation  can  be  settled,  such  as  the  appointment 
of  co- executors,  while  the  testator  may  at  the  same  time  obtain  valu- 
able advice  as  to  the  best  methods  of  carrying  out  his  wishes. 

Commissions  should  be  charged  on  each  item  when  it  is  collected, 
or  at  the  end  of  each  month  or  quarter,  except  in  estates  in  which 
the  rate  of  compensation  is  subject  to  review  by  the  courts.  The  gen- 
eral principle,  that  earnings  of  the  company  should  wherever  possible 
be  taken  credit  for  during  the  period  in  which  they  accrue,  holds 
good  here. 

1  For  compensation  of  trustees  in  the  various  states,  see  "  A  Trustee's  Handbook," 
by  Augustus  Peabody  Loring,  p.  30  et  seq. 


CHAPTER   IX 

SAFE   DEPOSIT  DEPARTMENT 
INTRODUCTION 

THE  necessity  of  making  adequate  provision  for  their  own  securi- 
ties has  resulted  in  the  establishment  by  many  trust  companies  of 
departments  for  safe  renters,  both  to  secure  a  direct  return  from  the 
expenditure  occasioned  by  the  erection  of  vaults  for  the  companies' 
own  use  and  to  add  to  the  convenience  of  their  customers. 

In  the  larger  cities  one  finds  separate  companies  doing  only  a 
safe  deposit  business,  as  well  as  safe  deposit  departments  connected 
with  banks  and  trust  companies.  In  smaller  places,  separate  organi- 
zations are  not  often  found.  The  company  assumes  full  respon- 
sibility for  the  safe-keeping  of  valuables,  and  the  small  fee  which 
is  paid  for  the  service  covers  both  storage  charges  and  a  practical 
guarantee  against  theft  or  other  loss. 

Where  land  is  valuable,  the  safe  deposit  vaults  are  often  in  the 
basement  of  the  building.  They  may  also  be  more  than  one  story 
in  height,  the  basement  vaults  being  devoted  to  the  storage  of  bulky 
packages,  and  those  on  the  main  banking  floor  to  the  renting  of  safe 
deposit  boxes.  Each  box  —  which  is  usually  made  of  heavy  japanned 
tin  or  light  steel  —  fits  into  a  compartment  just  large  enough  to  con- 
tain it.  The  case  in  which  these  boxes  are  kept  is  made  of  steel 
and  each  door  is  fitted  with  a  lock,  which  can  only  be  opened  by  using 
two  different  keys.  One  key  is  retained  by  the  company  while  the 
other  is  held  by  the  safe  renter.  As  no  duplicate  is  kept  of  the  renter's 
key,  he  should  always  be  impressed  with  the  necessity  of  keeping 
it  safely,  as  its  loss  will  require  cutting  open  the  lock  at  his  expense. 
Access  to  the  box  can  be  secured  only  by  the  renter  or  his  duly 
authorized  representative  in  conjunction  with  a  representative  of  the 
company.  Boxes  are  made  of  different  sizes  to  suit  the  needs  of  cus- 
tomers. They  are  usually  about  21"  long,  with  varying  height  and 
p  209 


210  THE   MODERN   TRUST   COMPANY 

width.  The  smallest  boxes  are  about  ij"  high  by  4^"  wide,  inside 
measurements.  The  rentals  vary  according  to  the  size  of  the  box 
or  safe,  the  smallest  sizes  costing  but  a  few  dollars  a  year.  Larger 
sizes  are  provided  for  the  use  of  bankers  and  corporations,  the  rental 
of  which  may  amount  to  several  hundred  dollars  per  annum. 

There  should  be  an  ample  force  to  guard  the  vaults  both  day 
and  night,  and  during  business  hours  to  attend  to  the  wants  of 
customers.  It  is  customary  to  have  a  locked  grill  door  at  the  en- 
trance of  the  safe  deposit  department,  at  which  a  watchman  is  sta- 
tioned who  admits  only  those  entitled  to  enter.  In  addition,  the  door 
can  be  fitted  with  an  electric  locking  attachment  operated  from  the 
desks  of  the  employees  who  are  stationed  at  various  points.  These 
employees  should  always  be  of  good  address,  courteous  and  obliging, 
and  of  undoubted  honesty.  They  should,  of  course,  be  under  bonds. 
While  the  vaults  are  open,  the  department  should  never  be  left  with- 
out an  adequate  force  of  attendants. 

The  safe  deposit  department  should  be  furnished  with  ample 
facilities  for  the  customers'  convenience.  There  should  be  rooms 
for  committee  and  other  meetings,  as  well  as  individual  desks  prop- 
erly protected,  or  small  private  rooms  for  coupon  cutting  and  exami- 
nation of  securities.  There  are  usually  special  apartments  for  ladies. 
Stationery,  envelopes,  coupon- cutters,  scissors,  rubber  bands,  and 
other  conveniences  are  provided  for  the  use  of  customers.  In  many 
companies  the  waiting  rooms  attached  to  the  safe  deposit  depart- 
ment are  attractively  furnished  and  are  supplied  with  newspapers, 
periodicals,  stock  sheets,  and  sometimes  with  a  ticker  and  telephone 
service. 

The  safe  deposit  vaults  are  usually  open  to  the  general  public  only 
during  banking  hours  unless  it  is  necessary  to  open  a  trifle  earlier 
and  close  a  little  later  on  account  of  the  bankers,  brokers,  and  other 
customers  whose  boxes  must  be  in  their  offices  during  the  same  busi- 
ness hours. 

A  record  is  often  kept  of  all  persons  entering  and  leaving  the  de- 
partment, and  of  the  number  of  the  box  visited.  In  times  of  panic  or 
great  stock  market  activity,  it  has  sometimes  been  found  impossible 
to  keep  such  a  record  without  unnecessarily  delaying  the  customers. 
As  soon  as  the  box  is  returned  to  its  place,  an  attendant  examines  the 
desk  or  room  occupied  by  the  customer,  to  see  if  anything  has  inad- 


SAFE   DEPOSIT   DEPARTMENT  211 

vertently  been  left  and  to  prepare  it  for  the  next  occupant.  This  is 
the  more  necessary  when,  as  sometimes  happens,  the  forgotten  article 
is  not  a  cane  or  an  umbrella  but  a  thousand-dollar  bond.  By  means 
of  the  record  of  visitors  and  examination  of  desks,  it  is  almost  always 
possible  to  locate  the  owner  of  lost  property.  It  helps,  too,  to  refute 
the  occasional  charge  that  a  valuable  paper  was  forgotten  or  lost 
during  a  visit  to  the  department,  a  charge  which  usually  ends  in  the 
document  being  found  in  its  proper  place.  The  attendants  should 
never  consent  to  take  care  of  open  boxes  while  their  owners  tempo- 
rarily absent  themselves,  but  should  always  insist  on  the  boxes  being 
returned  to  the  vault,  even  if  they  are  taken  out  again  in  a  few  min- 
utes. The  safe  renter  should  always  see  his  box  opened  and  closed, 
and  while  out  of  the  vault  it  should  be  constantly  under  his  eye. 

Owing  to  the  great  value  of  the  contents  of  public  safe  deposit 
vaults,  their  management  must  be  such  as  to  provide  every  possible 
precaution  to  prevent  loss.  When  legal  questions  arise  as  to  rights 
of  and  liability  to  box  'renters,  action  should  be  taken  under  advice 
of  counsel.  Access  should  never  be  permitted  except  to  the  box 
renter,  his  deputy  or  legal  representative.  In  the  case  of  corporations, 
properly  authenticated  authority  must  first  be  presented  and,  except 
to  look  for  a  will,  no  access  to  the  box  of  a  deceased  renter  should 
be  permitted  until  the  executor  or  administrator  has  presented  a 
proper  certificate  of  his  appointment.  When  the  ownership  of 
property  contained  in  a  safe  deposit  box  is  in  dispute,  prompt  steps 
should  always  be  taken,  by  legal  process  if  necessary,  to  determine 
the  rightful  owner. 

If  two  or  more  persons  must  appear  together  in  order  to  obtain 
access  to  a  box,  a  label  with  the  number  so  required  should  be  attached 
to  the  front  of  the  box.  The  company  assumes  such  full  respon- 
sibility in  regard  to  these  details  that  great  care  must  be  taken  to 
prevent  errors. 

In  addition  to  securities,  which  form  the  largest  part  of  their  con- 
tents, safe  deposit  boxes  are  made  the  receptacle  of  all  sorts  of  objects 
having  intrinsic,  sentimental,  or  other  value  —  from  a  lace  handker- 
chief to  the  ashes  of  a  deceased  relative.  During  the  McKinley-Bryan 
campaign,  large  quantities  of  gold  were  hoarded  in  safe  deposit  boxes, 
and  it  is  not  uncommon  after  the  death  of  a  safe  renter  to  find  in  his 
box  gold,  bank  notes,  or  bonds  bearing  coupons  long  since  overdue. 


212  THE  MODERN  TRUST  COMPANY 

Among  the  most  curious  visitors  to  the  department  are  those  with 
whom  the  accumulation  of  wealth  has  become  a  mania  and  who 
come  daily  to  see  and  finger  their  securities.  Many  persons  deposit 
their  wills  in  their  safe  deposit  boxes ;  indeed,  this  is  the  place  where 
such  papers  are  usually  first  sought  for. 

Special  vaults  are  often  provided  in  which  boxes  containing  title 
papers  and  other  matter  of  more  bulk  but  less  value  than  stocks, 
bonds,  and  jewellery,  can  be  left  for  safe- keeping  and  at  the  same  time 
be  easily  accessible.  In  other  vaults,  trunks  and  cases  containing 
silverware,  books,  works  of  art,  and  other  personal  property  are 
stored. 

Engravers  and  publishers  often  place  their  steel,  copper,  or 
electrotype  plates  in  safe  deposit  vaults  when  their  own  buildings  do 
not  afford  the  needed  protection,  and  manufacturers  avail  themselves 
of  this  protection  for  models,  patterns,  and  assets  of  all  sorts  which 
are  liable  to  damage  or  loss  through  fire  or  theft. 

Some  safe  deposit  companies  also  issue  certificates  of  deposit 
covering  securities  left  in  their  hands  for  safe-keeping.  An  engraved 
certificate  reciting  the  terms  of  the  deposit  and  enumerating  the 
items  received  is  given  the  owner,  and  the  securities  are  only  deliver- 
able on  the  return  of  the  certificate.  If  an  individual  owns  a  single 
bond,  the  cost  of  a  certificate  of  deposit  is  less  than  the  rent  of  a 
box,  and  in  case  the  security  is  needed  it  can  be  procured  by  express 
or  registered  mail  through  the  return  of  the  certificate  properly  in- 
dorsed. In  the  case  of  coupon  bonds,  the  safe  deposit  company 
may  also  agree  to  cut  the  coupons  as  they  mature,  and  hold  them 
ready  for  delivery.  The  charges  for  such  deposits  of  securities 
are  based  on  the  character  of  the  property.  Coupon  bonds  and 
other  securities  transferable  by  delivery  are  taken  at  a  higher  rate 
than  stocks  and  registered  securities.  Gold  and  silver  coin  and 
bullion,  jewellery  and  precious  stones,  are  charged  for  according  to 
value  and  space  occupied. 

As  the  business  of  the  safe  deposit  department  is  simple,  its  books 
and  records  need  not  be  complicated.  The  card  index  is  well  suited 
for  most  of  its  records,  although  sometimes  large  and  handsomely 
bound  books  are  preferred,  as  they  are  usually  in  the  view  of  cus- 
tomers and  present  a  more  attractive  appearance,  and  as  the  employees 
of  the  department  are  generally  not  pressed  for  time.  It  is,  however, 


SAFE  DEPOSIT  DEPARTMENT  213 

best  to  have  the  simplest  form  of  accounts  in  order  to  obtain  the  most 
accurate  results. 

All  cash  receipts  should  be  paid  to  the  receiving  teller,  and  rebates 
should  be  paid  out  by  the  paying  teller.  If  more  convenient,  the 
trust  department  receiving  teller  or  the  note  clerk  can  act  as  the 
cashier  of  the  safe  deposit  department.  The  general  principle  that 
records  and  cash  should  not  be  in  the  hands  of  the  same  individuals 
should,  however,  be  observed. 

The  system  of  records  here  described  is  that  of  the  safe  deposit 
department  of  a  trust  company.  When  safe  deposit  vaults  are  run 
as  an  independent  business,  a  set  of  general  books  is  also  required. 

One  system  of  records  is  used,  its  details  being  adapted  to  the 
somewhat  differing  requirements  of  the  two  main  divisions  of  the 
business,  —  the  renting  of  safes  and  deposit  of  valuables. 

In  companies  where  securities  are  received  for  safe- keeping  and 
certificates  of  deposit  are  issued  against  them,  the  same  forms  are 
used  as  in  the  case  of  the  storage  of  packages  containing  valuables, 
with  necessary  verbal  changes.  As  such  deposits  are  not  often  re- 
ceived, trust  companies  usually  preferring  to  encourage  the  owners 
of  securities  to  open  attorney  accounts  in  the  trust  department,  it 
does  not  seem  necessary  to  go  into  further  details  in  regard  to  them. 

RENTING   OF   SAFES 

As  soon  as  the  identity  of  the  customer  is  satisfactorily  established 
and  a  decision  has  been  made  as  to  the  size  of  the  safe  desired,  the 
rent  is  paid  and  a  receipt  is  issued  in  which  are  stated  the  limitations 
of  liability  assumed  and  the  rules  subject  to  which  the  safe  is  rented. 
The  receipts  are  numbered  consecutively  and  bound  in  books  with 
stubs  attached,  or  else  with  alternating  thin  leaves  on  which  a  carbon 
copy  is  taken. 

In  some  companies  it  is  the  practice  to  issue  this  receipt  in  the 
form  of  a  contract  or  lease.  The  actual  wording  of  this,  as  of  all 
other  safe  deposit  forms,  should  be  passed  on  by  counsel,  before 
adoption.  Most  of  the  records  of  the  department  are,  for  con- 
venience, kept  on  cards  4"  x  6"  in  size. 

At  the  time  a  safe  is  rented,  a  receipt  and  identification  card  is 
signed  by  the  customer,  acknowledging  that  he  has  received  the  keys 


214  THE  MODERN  TRUST  COMPANY 

for  the  box  and  the  receipt  for  rental,  and  agreeing  to  its  terms  and 
conditions.    At  the  bottom  of  the  card  is  a  brief  statement  which  is 

RECEIPT  FOR  RENT  OP  SAFE.  —  [Front] 


THE    MODERN   TRUST   COMPANY 

No 190^ 

RECEIVED  from 

Dollars  for  rent  of  Safe 

No in  the  Vaults  of  this  Company,  from 190    to 190—, 

during  which  term,  subject  to  the  conditions  and  regulations  indorsed 
hereon,  it  shall  be  the  property  of  the  lessee.  The  liability  of  the  Company, 
by  reason  of  the  letting,  is  limited  to  the  exercise  of  their  accustomed  dili- 
gence to  prevent  the  opening  of  said  Safe  by  any  person  other  than  the 
lessee  or  his  duly  authorized  representative,  and  is  assumed  upon  the  ex- 
press agreement  that  such  opening  shall  not  be  inferred  from  proof  of 
partial  or  total  loss  of  the  contents. 
$ 

Safe  Deposit  Supt. 


[Back] 


signed  by  the  renter  when  the  box  is  surrendered  and  the  contents 
have  been  removed. 

The  other  side  of  the  card  is  devoted  to  the  safe  number,  the  name 
and  address,  and  the  description  of  the  renter  which  is  recorded  for 
purposes  of  identification.  It  is  better  to  note  fixed  facts  rather  than 
possibly  changing  personal  characteristics  such  as  color  of  hair,  weight, 


SAFE   DEPOSIT  DEPARTMENT  21$ 

etc.  The  amount  of  information  taken  varies  greatly  in  different  com- 
panies. The  place  and  date  of  birth  and  names  of  parents,  in  addition 
to  the  customer's  name,  address,  and  occupation,  are  probably  suffi- 
cient. A  password  is  still  sometimes  used  as  a  further  means  of 
identification. 

RECEIPT  AND  IDENTIFICATION.  —  [Front] 


Date, —   190 — 

Received  from  THE  MODERN  TRUST  COMPANY  a  receipt  for  rent  of  a  Safe 

numbered ,  which  is  leased  by '. 

subject  to  all  the  rules  and  regulations  of  said  Company  as  indorsed  on  said 
receipt,  and  to  all  such  other  reasonable  rules  and  regulations  as  may  hereafter 
be  adopted. 

—  also  acknowledge  having  received keys  for  said  Safe. 

WITNESS  : 


hereby  surrender   Safe  No.  and   certify  that have 


removed  contents  of  same. 


[Back] 


Name, Safe  No. 

Address, 

Business, 


Place  of  birth, Date  of  birth, Password, 

Name  of  father, Name  of  mother, 


Name, 


Address, 
Business, 


Place  of  birth, Date  of  birth, Password, 

Name  of  father, Name  of  mother, 


The  identification  side  of  the  card  is  printed  so  that  the  descrip- 
tion of  two  renters  can  be  placed  on  it,  as  many  safes  are  rented  in 
joint  names.  The  receipt  and  identification  cards  are  white  in  color 
and  are  filed  alphabetically  by  the  renters'  names.  In  the  case  of 


2l6  THE   MODERN   TRUST   COMPANY 

two  individuals  renting  a  box  as  joint  tenants,  special  forms  are  some- 
times used  specifying  the  rights  of  both  or  of  the  survivor  to  have 
access  to  or  to  surrender  the  box  and  to  appoint  deputies.  These  facts 

APPOINTMENT  AND  IDENTIFICATION  OF  DEPUTY.  -  [Front] 


Appointment  of  . 

] 

Deputy. 

TQO— 

Safe  No. 

hereby  constitute  and  appoint 

to  be  .       Deput 

t  with  power  to  open  and  have  access  to  Safe  No 

(f\r  unv  ntHpr  *%aff»  tViat                  rnaxr  Vi 

rented  by                 .... 

prpaftpr 

rent),  in  the  Safe  Deposit  Vaults  of  THE  MODERN  TRUST  COMPANY,  and  to 
dispose  of  its  contents  as  freely  as  could  do  ,  until  revoke  this 
authority  in  writing. 
WITNESS  : 

T    C 

L.S. 

Above  appointment 

Pfltf, 

of  Deputy  is  hereby  revoked. 

[Buck] 


Description  of Deputy. 

Address, . . 

Business, . 


Place  of  birth, Date  of  birth,  _ 

Name  of  father, Name  of  mother, 


Password, Signature  of  Deputy, 

WITNESS  : 


can  also  be  included  in  the  rules  printed  on  the  receipt  or  contract 
issued  when  the  safe  is  rented. 

The  card  showing  the  appointment  and  identification  of  deputy  is 


SAFE  DEPOSIT  DEPARTMENT  217 

used  when  the  renter  desires  to  give  another  person  the  right  of  access 
to  his  safe.  One  side  of  the  card  gives  the  form  of  appointment, 
signed  by  the  renter,  which  authorizes  the  deputy  to  open  and  have 
access  to  the  safe  and  to  dispose  of  its  contents  until  the  authority  is 
revoked  in  writing.  Below  is  a  space  containing  a  revocation  clause. 
The  other  side  of  the  card  gives  the  description  and  signature  of 
the  deputy,  the  data  taken  being  the  same  as  in  the  case  of  the 
renter. 

This  card  should  differ  in  color  from  the  renter's  receipt  and  iden- 
tification card  already  described,  and  should  be  filed  directly 
back  of  it.  This  index  forms  a  complete  alphabetical  record  of  safe 
renters  and  their  deputies. 

Authority  to  enter  a  box  should  always  be  general  and  unqualified. 
Owing  to  its  liability  in  case  of  error,  the  trust  company  should  decline 
to  accept  orders  authorizing  access  to  procure  a  certain  paper  or 
security.  The  right  of  the  deputy  to  have  access  to  the  box  ends  on 
the  death  of  the  safe  renter. 

Cash  transactions  are  recorded  on  ledger  cards  bearing  the  name 
and  address  of  the  renter,  number  of  the  safe,  date  rented,  rate  and 
term.  The  ordinary  ledger  ruling  is  used,  the  card  being  wide 
enough  to  repeat  it.  There  are  columns  for  date  and  amount  of  rental 
due,  and  the  date  and  amount  of  each  payment.  The  cards  are  white, 
4"  x  6",  each  has  a  tab  showing  the  month  of  expiration  so  that  each 
month's  bills  may  be  made  out  without  handling  any  but  the  cards 
for  that  period.  The  cards  are  filed  numerically  by  safe  numbers, 
and  form  an  index  of  rented  safes.  The  case  in  which  all  keys  for 
unrented  safes  are  kept  takes  the  place  of  an  index  of  safes  avail- 
able for  renting. 

Bills  for  safe  rent  should  be  mailed  long  enough  in  advance  of  the 
date  of  expiration  to  enable  the  customer  to  renew  for  another  year 
or  to  give  notice  that  the  safe  will  be  surrendered.  The  bill  specifies 
the  number  of  the  safe,  the  term  covered,  and  the  amount  due,  with 
the  added  statement  that  the  letting  is  subject  to  all  the  terms,  con- 
ditions, provisions,  and  limitations  of  liability  provided  for  in  the 
original  receipt. 

At  the  same  time  that  the  bookkeeper  prepares  the  bill  he  fills  out 
a  credit  slip  with  the  same  data:  name  and  address,  number  of  safe, 
term,  date,  and  amount  due.  These  credit  slips  are  passed  to  the 


2l8  THE  MODERN  TRUST  COMPANY 

receiving  teller  or  other  officer  to  whom  the  rents  are  payable.  The 
slips  are  printed  on  white  cards,  and  are  filed  alphabetically  by 
names.  When  the  bill  is  presented  for  payment,  the  credit  slip 
is  taken  from  the  index  and  compared  with  the  bill.  It  is  then 
stamped  "  paid  "  and  is  passed  through  as  the  teller's  voucher  from 
which  all  bookkeeping  entries  are  made,  the  cash  being  placed  in  the 
general  books  to  the  credit  of  the  safe  deposit  department  and  in 
the  books  of  the  department  itself  to  the  credit  of  the  safe  renter. 
When  rebates  are  made,  a  charge  slip  is  prepared  in  the  safe  deposit 
department  giving  the  necessary  details,  and  the  cash  is  paid  out  by 
the  paying  teller. 

CORPORATE  RESOLUTION  GIVOTG  ACCESS  TO  INDIVIDUAL 


8 

*c 
1 
> 

& 

To  THE  MODERN  TRUST  COMPANY:  — 

At  a  mppting  ftf  thi»  RnarH  nf 

of  thp 

heM  at                                                   nn  thf» 

Hay  nf 

i  Trw-»     . 

the  following  resolution  was  duly  adopted  : 
RFsnr.vFn,  that 

heanH 

he  is  hereby 
the  Vaults  of 
this  authority 
o  said  Trust 

authorized  to  have  access  to  the  Safe  (No. 

^  in 

THE  MODERN  TRUST  COMPANY  leased  to  this  Company,  until 
is  duly  revoked,  of  which  written  notice  shall  be  given  1 
Company. 
(ATTEST)                                                                    (SIGNED) 

(SEAL) 

Secretary. 

President. 

When  a  safe  is  rented  by  a  corporation,  and  by  authority  of  its 
board,  access  is  given  to  an  individual,  a  certified  copy  of  the  resolu- 
tion delegating  such  power  should  be  required.  The  trust  company 
should  specify  the  wording  for  such  a  resolution  and  should  require 
the  certified  copy  to  be  on  a  form  which  it  furnishes.  A  white  card 
4"  x  6"  can  conveniently  be  used  and  can  be  filed  behind  the  renter's 
receipt  and  identification  card,  exactly  as  in  the  case  of  deputies 
appointed  by  individual  renters. 

If  the  safe  is  rented  by  a  corporation  which  by  a  resolution  of  its 
board  permits  one  or  more  of  its  officers  to  have  access  to  its  box, 


SAFE  DEPOSIT  DEPARTMENT  219 

a  certificate  of  election,  duly  executed  and  attested,  should  similarly 
be  required  and  filed  whenever  there  is  a  change  of  officers. 

CORPORATE  CERTIFICATE  OF  ELECTION  OF  OFFICERS 


To  THE  MODERN  TRUST  COMPANY:  — 

We    hereby    certify    that    the    following    named    officers  of  the 

Company, 

elected  at  a  meeting  held  on , 

have  duly  qualified  as  such,  and  that  there  has  been  no  change  in  officers 
since  that  meeting. 


(ATTEST)  (SIGNED) 


|       ]      (SEAL) 


Secretary.  President. 


Other  forms  are  often  used  to  provide  for  cases  when  the  customer 
cannot  be  present  in  person.  Such  forms  are  based  on  those  already 
described,  and  as  they  provide  for  special  cases  do  not  affect  the 
general  plan  of  organization.1 

DEPOSIT  OF  VALUABLES 

Immediately  on  receipt  of  the  trunk,  box,  or  parcel  received  for 
storage,  the  package  should  be  sealed  so  that  it  cannot  be  opened 
without  breaking  the  seal.  Exceptions  to  this  rule  must  be  made  in 
the  case  of  deposits  to  which  frequent  access  is  desired. 

The  certificate  of  deposit  is  bound  and  numbered  in  the  same  way 
as  the  original  receipt  for  the  rent  of  a  safe.  It  specifies  the  nature 
of  the  deposit,  its  value,  the  term  for  which  deposited,  and  the  amount 
paid.  The  certificate  also  gives  the  conditions  and  regulations 
subject  to  which  the  deposit  is  received,  including  a  statement  on 

1  See  Proceedings  of  Trust  Company  Section,  American  Bankers'  Association, 
1904 ;  Report  of  Special  Committee  on  the  Classification  of  Legal  Decisions  relating 
to  Safe  Deposit  Companies ;  Duty  and  Liability  to  Box  Holders,  and  a  compilation  of 
the  Rules  and  Forms  of  Typical  Companies. 


22O 


THE  MODERN  TRUST  COMPANY 


the  part  of  the  customer  that  it  contains  no  certificates  of  stock,  reg- 
istered or  coupon  bonds,  money,  jewellery,  or  precious  stones.  On 
the  certificate  is  also  a  form  of  receipt  to  be  signed  by  the  customer 
relieving  the  company  of  all  liability  on  surrender  of  the  deposit. 

CERTIFICATE  OP  DEPOSIT.  -  [Front] 


"S-- 

i 
II 


c« 

si 

1 


No.. 


THE   MODERN   TRUST   COMPANY 
Date, 


.190— 


This  is  to  certify  that. 


has  deposited  with  THE  MODERN  TRUST  COMPANY  for  safe  keeping 

said  to  contain valued  at  $ 

has  been  paid  to  this  Company. 


for  which  the  sum  of  $. 


In  consideration  whereof  the  said  deposit  is  to  be  safely  kept  by 
this   Company,  subject  to   the  conditions  and   regulations   indorsed 

hereon,  for  the  period  of ,  and  on  the  expiration  thereof, 

or  sooner  if  demanded  by  said  depositor,  it  shall  be  returned  to 

in  good  order  upon  the  surrender  of  this  certificate  and  identification  of 
the  depositor  if  required.  

Safe  Deposit  Supt. 


[Back] 


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As  in  the  case  of  safe  renting,  a  receipt  and  identification  card  is 
signed  by  the  depositor,  acknowledging  that  he  has  received  the  cer- 
tificate and  agreeing  to  the  terms  on  which  it  is  issued.  A  form  of 
release  and  receipt  for  the  deposit  is  also  printed  on  the  card,  for  use 
in  case  of  the  loss  or  non-production  of  the  certificate  at  the  time  the 
deposit  is  withdrawn. 


SAFE  DEPOSIT  DEPARTMENT  221 

The  other  side  of  the  card  contains  the  description  of  the  depositor. 
The  same  form  is  used  as  in  the  case  of  safe  renters,  except  that  the 
certificate  number  is  substituted  for  the  safe  number.  The  cards 

RECEIPT  AND  IDENTIFICATION  FOR  VALUABLES.  —  [Front] 


Date, ,  190 — 

hereby  acknowledge  the  receipt  of  Certificate  of  Deposit  No. 

for deposited  by in 

the  Storage  Vaults  of  THE  MODERN  TRUST  COMPANY,  valued  at  $ and 

containing  neither  certificates  of  stock,  registered  or  coupon  bonds,  money, 
jewellery,  or  precious  stones,  and  hereby  agree  to  the  rules  and  regulations  of 
THE  MODERN  TRUST  COMPANY  in  force  at  this  date  and  such  reasonable  rules 
and  regulations  as  may  be  hereafter  adopted. 


Date, ,  190 

Received  from  THE  MODERN  TRUST  COMPANY  the  above  mentioned  deposit 
and hereby  release  said  Company  from  all  liability  therefor. 


[Back] 


Name, Certificate  No. 


Address,  - 
Business,- 


Place  of  birth, Date  of  birth, Password, 

Name  of  father, Name  of  mother, 


Name, 


Address,  . 
Business,- 


Place  of  birth, Date  of  birth, Password, 

Name  of  father, Name  of  mother, 


are  4"  x  6"  in  size,  are  filed  alphabetically,  and  are  of  a  buff  color 
to  distinguish  them  from  the  cards  representing  safes. 

The  appointment  and  identification  of  deputy  card  is  similar  to 
that  already  described,  except  that  it  is  of  a  different  color  and  applies 


222  THE  MODERN   TRUST   COMPANY 

to  a  certificate  of  deposit  instead  of  to  a  safe.  The  authority  given 
is  general  and  authorizes  the  deputy  to  open  and  have  access  to  and 
dispose  of  the  contents  of  the  package  covered  by  the  certificate  until 
the  power  is  revoked  in  writing.  It 'is  filed  immediately  behind  the 
depositor's  card. 

The  ledger  card  is  of  buff  color  and  is  in  all  other  respects  like  the 
safe  rental  ledger  card,  except  that  the  number  of  the  deposit  replaces 
the  safe  number.  The  cards  are  filed  numerically  and  have  tabs 
showing  the  month  of  expiration. 

The  bills  specify  that  they  are  for  the  renewal,  until  a  given  date, 
of  the  deposit  of  valuables  covered  by  a  certain  certificate  the  number 
of  which  is  given. 

Credit  slips  are  used  like  those  already  described,  and  in  the  same 
way.  They  are  on  buff  cards  and  bear  the  number  of  the  certificate 
instead  of  the  safe  number. 

For  purposes  of  identification  a  stout  linen  or  manila  tag  should 
be  attached  to  each  package  and  bear  the  number  and  date  of  the 
certificate  and  name  of  the  depositor. 

As  a  matter  of  convenience  to  customers,  it  is  well  to  make  arrange- 
ments with  a  local  express  company  to  call  for  and  deliver  valuables 
at  a  fixed  scale  of  charges.  A  general  agreement  should  be  made 
between  the  trust  company  and  the  express  company,  defining  the 
liability  of  each,  and  a  written  order  should  always  be  taken  from  the 
customer.  A  printed  form  should  be  used  which  contains  an  order 
on  the  customer  to  deliver  to  the  express  company  the  packages 
described.  This  is  signed  by  its  representative  and  given  to  the 
owner  on  receipt  of  the  goods. 

When  valuables  are  delivered  to  their  owners  by  the  express  com- 
pany, a  similar  receipt  is  taken  from  the  owner  or  his  representative 
and  is  retained  by  the  express  company,  which  has  previously  receipted 
for  the  packages  on  receiving  them  from  the  trust  company. 

GENERAL  BOOKS 

The  record  of  persons  entering  the  department  shows  the  date, 
name,  number  of  safe  or  deposit  to  which  access  is  had,  and,  if  possi- 
ble, the  desk  or  room  occupied.  Such  a  record  is  valuable,  and 
should  be  accurately  kept. 


THE  MODERN  TRUST  COMPANY 
Safe.Deposit  Department 
Comparative  Monthly  Report-for 

SAFES 

No. 

Rental 

Safes  rented  as  per  last  report 

Add  Safes  rented  during  month 

Total 

Less  Safes  surrendered  during  month 

Total  Safes  rented  this  date 

"          "      one  year  ago 

Increase 

Decrease 

CERTIFICATES  OF  DEPOSIT 

No. 

Charges 

Certificates  outstanding  as  per  last  report 

Add  Certificates  issued  during  month 

Total 

Less  Certificates  cancelled  during  month 

Total  Certificates  outstanding  this  date 

j                "            *"                   "            one  year  ago 

Increase 

Decrease 

CASH 

1    Received  from  Safes  rented  and  renewed     (net) 

"      Certificates  of  Deposit  issued 

and  renewed                                           (net) 

Total  for  month 

1 

223 


224  THE  MODERN  TRUST  COMPANY 

All  safe  deposit  departments  use  one  or  more  books  in  which  a 
record  is  kept  of  rentals,  renewals,  and  surrenders.  A  single  book 
can  be  made  to  combine  a  cash  book  and  a  record  of  safes  rented  and 
surrendered,  and  valuables  deposited  and  withdrawn.  It  contains 
columns  for  the  date,  name  of  customer,  followed  by  sections  cover- 
ing rentals  and  renewals,  surrenders,  and  a  section  in  which  the  book- 
keeper notes  in  the  proper  columns  that  the  other  entries  resulting 
from  each  transaction  have  been  made. 

The  "rentals  and  renewals"  section  contains  subsections  covering 
both  safes  and  deposits.  The  former  shows  the  number  of  the  safe, 
whether  a  rental  or  renewal,  the  rate  and  period  on  which  it  is  based  in 
months,  the  date  from  which  rental  commences,  and  the  amount  paid. 
The  section  covering  deposits  is  exactly  similar  except  that  "  charges 
from"  replaces  "rental  from." 

The  "surrenders"  section  is  similarly  divided,  showing  the  safe 
number,  rate,  and  period  on  which  the  rate  is  based,  and  amount  of 
rebate,  if  any ;  deposit  number,  rate,  period  and  rebate. 

The  remaining  section  shows  that  the  transaction  has  been  en- 
tered on  the  renters'  or  depositors'  index,  and  the  ledger  card.  The 
last  column  is  for  the  controller's  initials  after  the  entries  have  been 
made  and  the  bookkeeper  has  initialled  the  proper  columns. 

Each  rental  or  deposit  of  valuables  is  entered  from  the  stub  of 
the  receipt  or  certificate  book.  Cash  entries  are  recorded  from  the 
credit  or  charge  slips.  The  book  is  closed  at  convenient  periods  and 
the  data  thus  obtained  are  used  as  the  basis  for  comparative  monthly 
reports.  These  reports  show  the  number  and  value  of  safes  rented, 
renewed,  and  surrendered,  the  value  of  certificates  of  deposit  issued 
and  cancelled,  and  the  total  business  of  the  department,  with  the 
figures  for  the  corresponding  period  of  the  previous  year  and  the 
resulting  increase  or  decrease. 


LBECQBD  BOOK. 


RENTALS  JIN  D  RENEWALS 


«-    Amoaot 


2otmd.il 


Dollars    .  Month 


CHAPTER  X 

SAVINGS  FUND   DEPARTMENT 

IN  the  large  cities  of  the  East,  where  savings  banks  have  existed 
for  many  years,  few  trust  companies  have  a  savings  department.  In 
the  West,  especially,  and  in  smaller  towns,  trust  companies  usually 
take  savings  deposits.  Sometimes,  as  in  the  Illinois  Trust  and  Sav- 
ings Bank  of  Chicago,  the  savings  department  is  the  most  important 


459401 

I  hereby  signify  my  assent  to  the  regulations  of  the 
Savings  Department  of  The  Modern  Trust  "Company 

Sign  here 

Address. 

Occupation 

Date  of  Birth 

Parents'names 

Married 

Name  of  wife  or  husband                                            Unmarried 

(       J                Widowed 

Birth  Place 

.Date                  Colored 

branch  of  the  company's  business.  In  most  trust  companies,  how- 
ever, the  savings  deposits  are  not  as  large  as  the  deposits  subject  to 
check. 

For  the  care  of  savings  deposits  it  is  usually  well  to  have  a  sepa- 
rate savings  department.    This  department  should  always  be  clearly 
Q  225 


226  THE  MODERN  TRUST  COMPANY 

indicated  by  signs,  so  as  to  prevent  confusion  between  the  customers 
of  the  banking  and  savings  departments.  In  the  savings  department 
windows  are  provided  for  "New  Accounts,"  "Receipt  of  Deposits," 
and  "Withdrawals."  The  paying  teller  of  the  banking  department 
may  attend  to  the  payment  of  withdrawals. 

Accounts  are  opened  at  the  "New  Accounts"  window,  where  a 
specimen  of  the  depositor's  signature  is  taken  on  a  card,  with  other 
information  which  will  serve  as  a  means  of  future  identification.  These 
cards  are  filed  numerically.  Cards  of  closed  accounts  are  kept  as  a 
separate  index.  The  deposit  book  bears  the  number  of  the  account 
and  name  of  the  depositor  on  the  cover,  and  contains  the  rules  and 
regulations.  The  cash  pages  have  a  date  column  and  two  cash 
columns  for  withdrawals  and  deposits,  respectively.  The  depositor 
is  required  to  present  the  book  each  time  a  deposit  or  withdrawal  is 
made. 

WITHDRAWAL  NOTICE 


$ Payable, 

- 190- 

To  THE  MODERN  TRUST  COMPANY, 
SAVINGS  FUND  DEPARTMENT. 

I  hereby  give  ten  days'  notice  for  the  withdrawal  of 

.Dollars, 

according  to  the  rules. 

Book  No 

Name, 

Residence, 

Money  due  on  a  holiday  paid  the  preceding  day. 
This  notice  will  be  cancelled  if  money  is  not  withdrawn  within  30  days  from  date. 


It  is  a  common  although  not  a  universal  practice  to  restrict  the 
amount  which  can  be  deposited  in  a  savings  account  each  year,  and 
to  fix  a  maximum  limit  for  the  account.  When  a  deposit  is  made,  a 
deposit  slip  is  filled  out,  if  possible  by  the  depositor,  with  the  number 
of  the  account,  name  and  address  of  the  depositor,  date,  and  amount 
of  deposit.  The  book,  with  the  deposit  and  slip,  is  passed  to  the 


SAVINGS   FUND   DEPARTMENT 


227 


savings  department  receiving  teller,  who  enters  the  amount  and  re- 
turns the  book  to  its  owner.  The  receiving  teller  lists  the  amounts 
of  the  deposit  slips  on  an  adding  machine  before  passing  them  to  the 
bookkeeper.  The  total  shown  by  the  adding  machine  settles  with 
the  cash  received  and  with  the  assistant  bookkeeper's  scratches 


WITHDRAWAL  SLIP                                BOOK  No. 

THE  NUMBER  IS  ON  THE  COVER  OF  YOUR  BOOK                                 DOLI 

.ARS               CENTS 

Write  the  amount  you  wish  to  draw  out  in  PLAIN  FIGURES. 
Dollars  under  the  word  "  Dollars,"  Cents  under  the  word  "  Cents."                & 

iP 

BRING    YOUR 

Ton 

BOOK                                                                                                                                                     * 

WE    DECLINE    TO           RECEIVED    OF 

PAY  UNLESS 

THE   MODERN  TRUST  COMPANY 

WRJTE  HERE  THE                                            SAVINGS  FUND  DEPARTMENT 

AMOUNT  VERY 
PLAINLY  IN 

WORDS.                                 .                                                                                        TV»T.T.AR<: 

YOU  DID  AT 
FIRST. 
PRESENT  ADDRESS 

EXAMINED  BY                                             PAID  BY                                            ENTERED   BY 

Savings  accounts  are  not  subject  to  check.  The  savings  depart- 
ment either  requires,  or  reserves  the  right  to  require,  notice  before 
withdrawals  are  made.  When  such  notice  is  given,  the  amount  to 
be  withdrawn  and  other  particulars  are  written  on  a  card.  These 
cards  are  filed  by  payment  dates  and  account  numbers,  and  are  de- 
stroyed by  the  withdrawal  clerk  after  payment  has  been  made.  When 
the  depositor  comes  to  get  the  money,  he  fills  out  a  withdrawal  slip 
with  the  date,  account  number,  name  and  address  of  the  depositor, 
and  amount  received.  The  withdrawal  clerk  compares  the  signature 
on  the  withdrawal  slip  with  the  specimen  on  file,  satisfies  himself  as 
to  the  identity  of  the  depositor,  and  initials  the  slip  to  show  this  fact. 
The  deposit  book  and  slip  then  go  to  the  bookkeeper,  who  examines 
the  balance  on  the  ledger  card  and,  finding  it  sufficient,  enters  the  pay- 
ment in  the  pass  book  and  changes  the  balance  on  the  ledger  card. 


LEDGER  CARD 


X-2 

-x                              r~ 

332022 

Withdrawals 

Deposits 

Dates 

Balance 

PATENTED  1AY  2S,  1»S7 

•MR 

•>••'!?=.- 

liai 

ARY   S  URE»U  C  9O4T3 

228 


SAVINGS   FUND  DEPARTMENT  229 

He  at  the  same  time  initials  the  slip.  The  book  and  slip  then  go  to 
the  paying  teller,  to  whose  window  the  depositor  has  already  been  sent. 
After  comparing  the  entry  in  the  book  with  the  amount  of  the  slip 
and  asking  the  depositor  the  name  of  the  account  and  amount  of  the 
payment,  the  paying  teller  hands  out  the  book  and  the  cash  and  re- 
tains the  slip  as  a  receipt.  If  the  entire  amount  on  deposit  is  with- 
drawn, the  pass  book  is  retained  by  the  company.  The  withdrawal 
slips  are  totalled  on  an  adding  machine.  This  figure  becomes  an 
item  hi  the  teller's  settlement  and  agrees  with  the  total  shown  by  the 
assistant  bookkeeper's  scratcher. 

The  depositors'  ledger  is  kept  on  cards  filed  numerically.  The 
cards  are  ruled  on  both  sides  with  columns  for  withdrawals,  deposits, 
dates,  and  balances.  The  number  and  name  appear  at  the  top,  and 
a  projecting  tab  bears  the  last  or  unit  figure  of  the  account  number. 
By  the  use  of  guide  cards  and  these  tabs,  the  desired  card  can 
quickly  be  turned  to.  Postings  are  made  from  the  deposit  and  with- 
drawal slips.  The  bookkeeper  changes  the  balance  only.  The  assist- 
ant enters  the  date  and  amount  of  the  item  in  the  proper  columns  and 
examines  the  change  which  has  already  been  made  in  the  balance 
column.  Withdrawals  are  posted  in  red,  and  the  rulings  of  this 
column  are  also  red.  The  deposits  and  balances  are  posted  in  black. 

The  scratchers,  kept  by  an  assistant,  are  ruled  with  columns  for 
the  account  number,  name,  and  cash.  Separate  scratchers  are  used 
for  deposits  and  withdrawals.  The  items  are  posted  from  the  de- 
posit and  withdrawal  slips,  and  the  totals  for  the  day  settle  with 
the  teller's  figures. 

When  changing  the  balance,  the  bookkeeper  inserts  a  blotter  or 
slip.  The  assistant,  after  posting  the  deposits  or  withdrawals,  makes 
a  pencil  footing  of  the  column  which  has  been  changed.  In  this  way 
the  cards  are  always  kept  ready  for  a  trial  balance.  Trial  balances 
are  taken  off  in  blocks  of  from  five  to  ten  thousand  accounts.  De- 
posit and  withdrawal  footings  as  well  as  balances  are  taken  off  so 
as  to  make  an  additional  test  of  the  accuracy  of  the  work. 

Interest  is  allowed  on  even  dollars  and  for  calendar  months  only. 
The  rate  varies  in  different  places.  It  is  usually  from  three  to  four 
per  cent  per  annum,  and  is  added  to  the  accounts  semi- annually. 


CHAPTER  XI 

LIFE,  FIDELITY,  AND   TITLE   INSURANCE   AND   SURETYSHIP 

THE  first  corporations  in  this  country  authorized  by  law  to  act  in 
fiduciary  capacities  were  originally  organized  as  life  insurance  com- 
panies. The  insurance  of  lives  and  granting  of  annuities  formed 
the  mainstay  of  these  older  companies,  while  their  trust  business 
was  in  its  infancy.  The  gradual  tendency  has  been  toward  a  sepa- 
ration of  the  two  forms  of  business,  so  that  now  some  companies 
bear  witness  to  their  original  character  only  in  their  names,  others 
still  carry  some  insurance  business  on  their  books  but  take  no  new 
risks,  while  in  recent  years  many  companies  in  states  having  a  gen- 
eral trust  company  law  have  reinsured  their  remaining  insurance 
risks,  have  eliminated  the  word  "insurance"  from  their  titles,  and 
have  taken  advantage  of  the  provisions  of  the  general  law. 

A  few  trust  companies  still  conduct  flourishing  life  insurance  de- 
partments. In  such  cases  the  insurance  department,  although  related 
to  a  certain  extent  to  the  banking  and  trust  departments,  has  a  sepa- 
rate organization,  is  subject  to  different  state  laws,  and  is  super- 
vised by  the  insurance  departments  of  the  states  in  which  it  does 
business.  One  highly  successful  company  is  organized  as  a  stock 
corporation,  but  its  life  insurance  department  is  on  a  mutual  basis. 
In  this  case  the  insurance  department  bears  the  entire  expense  of 
the  home  office,  including  the  cost  of  banking  and  trust  departments. 
The  statement  is  made  that  this  is  more  than  repaid  to  the  policy 
holders  by  the  benefits  of  such  an  intimate  connection  with  the  other 
departments.  It  is  certainly  to  the  advantage  of  the  stockholders 
to  have  the  expense  account  eliminated  from  the  general  profit  and 
loss  account.  A  trust  company  doing  an  insurance  business  is 
required  by  law  to  keep  a  special  reserve  to  secure  its  policy  holders. 

Other  forms  of  insurance  now  more  often  found  in  connection 
with  trust  functions  are  fidelity  insurance  and  the  business  of  acting 
as  surety  on  official  and  other  bonds,  and  title  insurance.  Until 

230 


LIFE,  FIDELITY,   TITLE   INSURANCE   AND  SURETYSHIP      231 

twenty-five  years  ago  nearly  all  fidelity  insurance,  or  guaranteeing 
of  the  honesty  of  public  officials,  officers  and  employees  of  corpora- 
tions, etc.,  was  done  by  giving  the  personal  bonds  of  individuals 
owning  real  estate.  As  soon  as  the  advantages  of  a  corporate  guar- 
antee were  realized,  it  was  but  a  short  step  to  fidelity  insurance,  and 
the  business  of  becoming  security  on  bonds  required  by  law,  condi- 
tioned for  the  faithful  performance  of  contracts  and  other  obliga- 
tions. The  only  obstacle  to  fidelity  insurance  was  a  prejudice  in 
favor  of  the  personal  bond ;  in  the  surety  business,  public  sentiment 
had  to  be  aroused  and  laws  enacted  before  the  corporate  bond 
could  be  accepted  by  the  courts.  Many  trust  companies  which 
have  done  a  fidelity  or  surety  business  in  the  past  are  either  taking 
no  new  risks  or  are  assuming  no  obligations  of  this  character  except 
when  fully  protected  by  counter  indemnity  constituting  adequate 
security  for  the  risk  assumed. 

Another  development  of  the  insurance  idea  has  been  its  exten- 
sion to  real  estate  titles.  The  title  insurance  companies  have  vastly 
simplified  real  estate  transactions.  Laboriously  made  and .  costly 
searches  and  briefs  of  title,  accompanied  by  an  opinion  of  counsel, 
are  done  away  with,  and  a  guarantee  against  possible  loss  issued  by 
a  corporation  of  recognized  financial  standing,  supersedes  an  indi- 
vidual opinion  as  to  the  validity  of  the  title.  The  corporate  con- 
veyancer now  occupies  a  position  in  the  business  community  as  well 
recognized  as  that  of  the  corporate  trustee. 

A  fully  equipped  title  insurance  company  has  in  its  possession  an 
abstract  of  every  deed,  mortgage,  sheriff's  sale,  and  lien  of  record 
relating  to  each  property  in  the  district  in  which  it  operates.  These 
records  are  its  stock  in  trade  and  enable  it  rapidly  and  accurately 
to  prepare  abstracts,  make  searches,  and  attend  to  the  multifarious 
details  of  real  estate  transfers.  The  title  company  can  prepare  the 
title  papers,  make  the  settlement  and  issue  its  settlement  certificate, 
put  the  deeds  and  mortgages  on  record,  and  guarantee  the  validity 
of  the  title.  Its  office  force  includes  both  lawyers  and  conveyancers, 
whose  technical  knowledge  is  requisite  to  a  successful  conduct  of  the 
business. 

Even  where  the  Torrens  system1  of  registration  of  real  estate 
titles  has  been  put  into  operation,  the  business  of  the  title  companies 

1  See  p.  176. 


232  THE   MODERN   TRUST  COMPANY 

still  flourishes.  This  is  explained  by  the  large  number  of  transfers 
still  made  by  the  old  methods,  and  by  the  fact  that  the  municipality 
must  procure  from  a  title  company  the  usual  abstract  before  a  title 
can  be  recorded  for  the  first  time  under  the  Torrens  system. 

In  some  states,  trust  companies  are  permitted  to  do  a  title  insur- 
ance business,  in  others  the  exercise  of  the  two  functions  is  pro- 
hibited. In  Pennsylvania,  title  insurance  has  been  successfully 
combined  with  trust  functions.  The  National  Bank  Act  provides 
that  corporations  may  be  formed  in  the  District  of  Columbia  for  the 
purpose  of  carrying  on  any  one  of  the  following  classes  of  business :  — 

"  FIRST  :  A  safe  deposit,  trust,  loan,  and  mortgage  business. 

"  SECOND  :  A  title  insurance,  loan,  and  mortgage  business. 

"  THIRD  :  A  security,  guaranty,  indemnity,  loan,  and  mortgage  business ;  Pro- 
vided, That  the  capital  stock  of  any  of  said  companies  shall  not  be  less  than  one 
million  dollars ;  Provided  further.  That  any  of  said  companies  may  also  do  a 
storage  business  when  their  capital  stock  amounts  to  the  sum  of  not  less  than 
one  million  two  hundred  thousand  dollars." l 

The  act  thus  prohibits  the  exercise  of  trust  functions  and  the  assump- 
tion of  insurance  risks  by  the  same  company. 

The  gradual  development  of  the  trust  company  idea  along  other 
lines  seems  to  demonstrate  that  a  company  devoted  to  the  care  of 
estates  should  not  assume  future  obligations,  such  as  an  insurance 
business  entails.  The  maintenance  of  an  insurance  department, 
however  successful,  is  not  likely  to  act  as  an  argument  in  favor  of  the 
appointment  of  the  company  as  executor  or  trustee.  The  wonderful 
growth  and  development  of  insurance  companies  in  this  country 
have  resulted  from  the  organization  of  the  great  corporations  devoted 
solely  to  insurance,  and  the  present  tendency  toward  a  separation 
of  insurance  from  general  trust  business  seems  likely  to  continue. 

The  profits  of  insurance  of  any  kind  depend  on  the  volume  of 
business  as  well  as  on  its  management,  and  in  this  element  of  suc- 
cess, too,  the  large  insurance  company  has  an  advantage  over  the 
trust  company  which,  as  one  of  its  many  functions,  carries  on  an 
insurance  business  on  a  limited  scale. 

1  "Statutes  at  Large  of  the  United  States,"  Vol.  26  (1890),  Chap.  1246. 


CHAPTER  XII 

GENERAL  ACCOUNTING 
THE  CONTROLLER 

No  matter  how  perfect  the  system  upon  which  the  business  of  a 
trust  company  is  conducted,  its  practical  application  is  in  the  hands 
of  officers  and  employees  who  are  only  human  and  therefore  liable  to 
make  mistakes.  Some  may  become  unprogressive  in  their  methods, 
while  others  may  be  too  eager  to  introduce  changes,  which  though 
attractive  from  the  standpoint  of  one  department  do  not  properly 
fit  into  the  general  plans  of  the  company.  It  therefore  becomes 
necessary  to  lodge  in  'some  one  person  or  group  of  persons  the 
authority  to  maintain  and  supervise  the  accounts  and  records  of  the 
company. 

In  a  small  company  the  work  may  be  done  by  the  general  officers 
with  the  assistance  of  the  general  ledger  bookkeeper.  In  a  large  com- 
pany the  general  officers  are  properly  relieved  of  such  duties.  Another 
officer,  known  as  the  controller,  or  sometimes  as  the  auditor,  is  en- 
gaged. This  officer  becomes  the  final  link  in  the  bookkeeping  chain, 
and  his  authority  should  extend  to  all  departments  of  the  company. 
Changes  in  accounting  methods  that  are  at  all  radical  should  be  sub- 
mitted by  him  to  the  general  officers,  and  in  some  cases  action  by  the 
board  of  directors  is  advisable.  Continuity  of  policy  and  uniformity 
of  records  are  prime  requisites  in  the  permanent  success  of  any  busi- 
ness, and  while  a  trust  company  should  always  be  progressive  and 
ready  to  adopt  genuine  improvements,  it  should  not  be  continually 
making  changes  that  are  of  uncertain  value.  When  once  a  satis- 
factory system  is  installed,  it  should  be  maintained  reasonably  in- 
tact. If  it  is  based  upon  proper  principles,  further  improvements 
will  be  in  the  nature  of  a  development  rather  than  an  alteration,  and 
as  such  may  be  readily  introduced. 

It  is  a  part  of  the  controller's  duty  to  see  that  the  system  adopted 
is  faithfully  carried  out  in  all  departments,  and  by  every  employee. 

233 


234  THE  MODERN   TRUST   COMPANY 

At  the  same  time  he  should  be  constantly  on  the  alert  to  detect  weak- 
nesses and  to  discover  means  of  saving  labor  and  securing  more 
accurate  records.  To  do  this,  a  man  must  possess  a  good  knowledge 
of  accounts  and  considerable  force  of  character,  coupled  with  a  large 
degree  of  tact.  He  should  be  appointed  by  the  board  of  directors 
and  be  directly  responsible  to  the  president  for  the  proper  discharge 
of  his  duties.  No  changes  in  the  accounting  system  should  be  made 
by  any  clerk  without  the  approval  of  the  controller,  and  only  the 
president  and  the  board  should  have  the  right  to  direct  that  changes 
be  made  contrary  to  his  judgment. 

The  controller  should  prepare,  or  at  least  approve,  all  reports  or 
statements  issued  to  the  public  or  compiled  for  the  use  of  officers  and 
directors.  He  should  verify  the  settlements  of  depositors'  accounts 
and  the  statements  rendered  to  beneficiaries  by  the  trust  department. 
He  should  examine  and  initial  all  entries  for  the  receipt  and  delivery 
of  securities  owned  by  the  company  or  held  by  the  trust  department, 
and  he  should  be  authorized  to  make  at  frequent  intervals,  but  with- 
out previous  announcement,  examinations  of  all  the  departments  of 
the  company.  In  these  examinations  he  should  rely  mainly  upon 
comprehensive  tests  which  he  can  make  without  attempting  to  verify 
each  item.  It  should  also  be  a  part  of  his  duty  to  approve,  before 
payment,  all  vouchers  for  expenses,  repairs,  etc.,  whether  for  the 
company's  account  or  for  the  accounts  held  in  the  trust  department. 
The  controller's  work,  if  done  efficiently,  will  serve  as  an  internal 
check  upon  the  work  of  the  office,  and  go  far  to  detect  and  cor- 
rect clerical  errors  which,  if  allowed  to  pass  unnoticed,  detract 
from  the  reputation  of  a  company  and  at  times  prove  a  cause  of 
serious  financial  loss.  In  addition  to  this,  his  constant  oversight 
and  firm  grasp  of  the  details  of  the  company's  business  will,  in  most 
cases,  restrain  an  officer  or  employee  from  taking  the  first  false  step 
to  disgrace  and  ruin. 

COMPANY'S  GENERAL  LEDGER 

The  results  of  the  company's  business  in  all  its  departments  are 
brought  together  in  the  general  ledger.  The  accounts  should  be  so 
arranged  that  trial  balances  can  be  taken  off  at  a  moment's  notice, 
and  the  real  condition  of  the  company  be  clearly  and  fully  shown 
without  rearrangement  or  analysis  of  figures. 


GENERAL  ACCOUNTING  235 

The  order  of  the  accounts  in  the  ledger  is  determined  by  the  order 
in  which  they  should  appear  on  the  balance  sheet.  Under  the  two 
main  divisions  of  principal  and  income,  credit  accounts  come  before 
debit  accounts.  The  quicker  assets  head  the  list.  The  exact  names 
of  the  accounts  may  vary,  but  they  should  always  be  the  simplest 
that  will  clearly  denote  the  purpose  for  which  the  account  is  opened. 

In  the  general  ledger  of  every  trust  company,  most  of  the  follow- 
ing accounts  will  be  found :  — 

PRINCIPAL 
Assets  Liabilities 

Cash  Deposits  subject  to  check 

Demand  loans  Due  to  banks  and  bankers 

Time  loans  Special  deposits 

Commercial  paper  Savings  deposits 

Stocks  Certificates  of  deposit 

Bonds  Certified  checks 

Mortgages  Dividends  unpaid 

Postage  stamps  Accrued  interest  payable 

Accounts  receivable  Expenses  payable 

Accrued  interest  receivable  Taxes  payable 

Real  estate  Bonds 
Banking  house,  furniture,  and  fixtures       Capital  stock 

Taxes  paid  in  advance  Surplus 

Undivided  profits 

INCOME 

Expenses  Interest  receipts 

Taxes  Commissions 

Interest  paid  depositors  Safe  deposit  rentals 

Errors  in  cash  Errors  in  cash 

Profit  and  loss  Profit  and  loss 

"  Cash  "  is  one  of  the  most  active  accounts,  and  as  it  is  the  quick- 
est asset,  appears  first  on  the  list.  All  cash,  whether  on  deposit  or  in 
the  company's  vaults,  is  carried  in  this  account.  In  the  daily  cash 
report  the  amount  is  itemized  to  show  notes,  specie,  and  checks  in 
vault,  and  the  balances  on  deposit  in  other  banks. 

Next  in  order  are  "  demand  loans,"  "  time  loans,"  and  "  commer- 
cial paper."  The  details  of  the  various  sorts  of  loans  are  shown  in 
auxiliary  books.  The  commercial  paper  account  is  often  called  "  bills 
receivable"  or  "bills  purchased."  The  notes  which  it  represents  are 


236  THE   MODERN   TRUST   COMPANY 

usually  unsecured,  although  occasionally  they  are  accompanied  by 
collateral. 

Then  come  the  permanent  investment  securities,  "  stocks," 
"  bonds,"  and  "  mortgages."  A  detailed  record  of  these  securities  is 
kept  in  an  auxiliary  set  of  ledgers.  Real  estate  loans  are  carried  in 
the  mortgage  account.  Ground  rents,  such  as  are  found  in  Phila- 
delphia, are  included  under  the  general  head  of  mortgages  in  state- 
ments to  the  commissioner  of  banking,  but  are  usually  carried  in  a 
separate  account  on  the  books  of  the  Philadelphia  trust  companies. 
When  a  trust  company  issues  its  obligations,  secured  by  mortgages 
held  specifically  as  collateral  security,  a  separate  account  "  mort- 
gages to  secure  bond  issues  "  appears  in  the  general  ledger. 

Postage  stamps  when  purchased  should  be  charged  to  a  "  postage 
stamps  "  account.  A  petty  postage  stamp  book  can  be  kept,  in  which 
both  cash  sales  and  deliveries  to  the  various  departments  are  re- 
corded. The  total  cash  sales  and  the  amount  of  stamps  delivered 
are  credited  monthly  to  the  general  ledger  account,  while  each  de- 
partment is  charged  through  the  expense  account  with  the  cost  of 
the  stamps  it  has  used. 

" Accounts  receivable"  can  be  made  a  receptacle  for  assets  of 
uncertain  value. 

"  Accrued  interest  receivable."  This  account  is  charged  by  jour- 
nal entry  at  the  end  of  each  month  with  the  proportion  of  interest  which 
has  been  earned  on  investments  and  loans  during  the  month,  and  at 
the  same  time  the  income  account  "interest  receipts"  is  credited 
with  the  same  sum.  The  object  of  this  entry  is  to  credit  earnings 
each  month  with  the  proportion  of  income  actually  accrued  instead 
of  with  the  items  which  happen  to  be  paid.  The  accrued  returns 
on  each  class  of  investment  are  shown  in  itemized  form  in  the  aux- 
iliary ledgers. 

It  is  well  to  show  real  estate  held  for  investment  purposes  sepa- 
rately from  that  occupied  by  the  company's  office.  The  "real 
estate"  account  shows  the  total  book  value  of  all  real  estate  owned 
by  the  company,  exclusive  of  the  building  it  occupies. 

"Banking  house,  furniture,  and  fixtures"  represents  the  cost  of 
these  items.  The  value  of  land,  building,  furniture,  and  fixtures 
may  be  separated  if  desired.  A  further  subdivision  may  also  be  made 
to  show  the  cost  of  safe  deposit  vaults,  title  plant,  branch  offices,  etc. 


GENERAL  ACCOUNTING  237 

"Taxes  payable."  The  balance  in  this  account  may  appear  on 
either  side  of  the  ledger.  All  taxes  when  paid  are  charged  against 
this  account.  When  the  balance  shows  as  an  asset,  it  represents 
taxes  paid  in  advance.  When  the  balance  appears  as  a  liability,  it 
represents  the  taxes  that  have  accrued  and  are  unpaid.  This  account 
is  credited  at  the  end  of  each  month  with  approximately  one-twelfth 
of  the  year's  taxes,  while  the  expense  account  "taxes"  is  charged 
with  a  similar  amount.  At  the  end  of  the  year  any  balance  in  "  taxes 
payable  "  is  brought  down  as  an  item  belonging  to  the  succeeding 
year. 

"Deposits  subject  to  check"  gives  the  net  amount  due  individual 
depositors  as  shown  in  detail  in  the  individual  depositors '  ledgers.  If 
more  than  one  class  of  deposits  are  received,  the  best  plan  is  to  have 
separate  ledgers  for  each  class  of  deposits  and  to  show  the  balance  of 
each  in  the  general  ledger,  so  that  the  company's  liability  on  account 
of  funds  subject  to  check,  court  accounts,  or  other  special  deposits, 
can  be  ascertained  from  the  general  balance  sheet. 

"  Due  to  banks  and  bankers."  Deposits  received  from  other 
financial  institutions  should  be  carried  separately  from  the  ordinary 
individual  check  accounts,  as  they  are  a  very  quick  liability  and  may 
be  drawn  against  in  large  sums,  particularly  when  funds  are  scarce. 
It  is  therefore  necessary  to  provide  an  ample  reserve  against  this 
class  of  deposit  and  to  watch  carefully  its  fluctuations  as  shown  by 
the  general  ledger  balance. 

Special  deposits  are  often  received  and  held  subject  to  agree- 
ments which  preclude  their  being  classed  with  the  ordinary  deposits. 
Such  items  are  kept  in  a  "special  deposits"  account,  or  they  may  be 
included  with  certificates  of  deposit. 

As  savings  deposits  are  not  subject  to  check,  and  as  a  higher 
rate  of  interest  is  paid,  it  is  necessary  to  show  the  net  liability  on 
account  of  savings  deposits  separately  from  the  other  sorts  of 
deposits. 

"  Certificates  of  deposit "  represents  special  deposits,  not  subject 
to  check,  the  obligation  being  issued  in  favor  of  the  depositor  or 
according  to  his  direction,  and  being  payable  on  demand  or  in  ac- 
cordance with  the  agreement  on  the  face  of  the  certificate.  The 
general  ledger  account  is  credited  with  all  certificates  issued  and  is 
charged  with  those  paid.  The  balance  of  the  account  represents  the 


238  THE  MODERN  TRUST  COMPANY 

amount  of  outstanding  obligations  as  shown  by  the  stubs  of  the 
certificate  of  deposit  book  or  by  an  auxiliary  ledger. 

"  Certified  checks."  When  a  check  is  certified  it  is  charged 
against  the  depositor's  account  and  credited  to  the  general  ledger 
account.  When  the  check  is  finally  paid,  the  amount  is  charged 
against  "certified  checks." 

On  the  date  when  a  dividend  is  declared,  a  journal  entry  is  made 
charging  undivided  profits  and  crediting  " dividend  account"  with 
the  amount  of  profits  to  be  distributed.  As  a  matter  of  convenience, 
it  is  well  to  open  a  separate  account,  numbered  to  correspond  with  the 
number  of  the  dividend  declared.  Payments  made  on  account  of  divi- 
dends are  charged  to  the  account  of  the  dividend  to  which  they  belong. 

"Accrued  interest  payable"  is  credited  by  journal  entry  at  the 
end  of  each  month  with  the  amount  of  interest  accrued  on  the 
various  classes  of  deposits.  By  the  same  entry  "  interest  paid  de- 
positors" is  charged  with  a  similar  amount.  The  balance  standing 
to  the  credit  of  "accrued  interest  payable"  represents  the  liability 
for  interest  accrued  and  unpaid.  When  interest  is  credited  in  the 
depositors'  accounts,  the  total  is  charged  against  this  account  and 
credited  to  "deposits  subject  to  check,"  or  any  other  class  of  de- 
posits on  which  interest  is  being  paid. 

"  Expenses  payable."  The  balance  to  the  credit  of  this  account 
represents  the  amount  of  unpaid  bills.  At  the  end  of  each  month, 
the  total  amount  shown  by  the  record  of  expenses  is  credited  to 
"expenses  payable"  and  charged  against  "expenses."  All  ex- 
pense payments  are  charged  against  "expenses  payable."  By  this 
method  all  expenses,  whether  paid  or  not,  are  charged  against  the 
period  in  which  they  are  incurred,  and  the  unpaid  balance  is  shown 
in  this  account. 

"Taxes  payable"  has  already  been  described.  When  the  bal- 
ance appears  as  a  liability,  it  represents  the  amount  of  taxes  accrued 
but  not  yet  paid. 

When  trust  companies  issue  bonds  secured  by  mortgage  or  other 
collateral,  the  total  amount  of  the  issue  is  shown  in  a  general  ledger 
account.  Such  bonds  are  a  direct  obligation  of  the  trust  company, 
whose  profit  consists  in  the  difference  between  the  rate  of  interest  it 
pays  and  that  which  it  receives  on  the  mortgages  or  other  securities 
in  which  the  proceeds  of  the  sale  of  the  bonds  are  invested. 


GENERAL  ACCOUNTING  239 

"Capital  stock "  and  "surplus"  represent  the  permanent  capital 
employed  in  the  business. 

The  "undivided  profits"  account  represents  all  undivided 
profits  except  those  in  the  surplus  account,  unless  another  account 
is  opened  for  profits  held  as  a  special  reserve.  "Undivided  profits" 
is  credited  at  the  close  of  each  fiscal  year  with  the  net  profits  as  shown 
by  the  profit  and  loss  account. 

"Interest  receipts"  is  credited  with  all  interest  received  on  loans 
and  investments,  including  income  from  real  estate.  It  is  charged 
with  payments  for  interest  accrued  on  investments  at  the  time  of 
purchase  and  other  similar  items.  At  the  close  of  the  fiscal  year  the 
balance  is  credited  to  the  profit  and  loss  account. 

In  the  "commissions"  account  receipts  from  special  depart- 
ments, such  as  the  trust  or  title  department,  are  credited.  Special 
income  receipts,  such  as  commissions  on  account  of  underwriting 
syndicates,  etc.,  are  also  credited  to  this  account,  and  in  general 
such  items  as  are  distinct  from  the  ordinary  returns  from  investments, 
and  yet  not  of  a  character  to  be  properly  credited  directly  to  profit 
and  loss. 

"Safe  deposit  rentals"  are  entered  as  a  separate  item  so  as  to 
show  the  return  upon  the  capital  invested  in  the  safe  deposit  depart- 
ment. 

All  "errors  in  cash"  are  charged  or  credited  to  this  account,  as 
the  case  may  be.  The  totals  of  both  sides  of  the  account  should  be 
shown  on  the  monthly  balance  sheets. 

The  "profit  and  loss"  account  is  credited  with  all  gains  on  invest- 
ments when  sold  and  charged  with  all  losses  on  investments.  At 
the  close  of  the  fiscal  year  it  is  credited  with  all  income  in  the  way 
of  interest,  commissions,  or  other  receipts,  and  is  charged  with  the 
balance  of  expense  and  taxes  accounts.  A  charge  may  also  be  made 
for  depreciation  of  the  building  and  equipment.  The  balance  of 
profit  and  loss  account,  representing  the  net  gain  or  loss  for  the  year, 
is  closed  to  undivided  profits  as  noted  above.  These  closing  entries 
are  made  through  the  journal  and  should  be  accompanied  by  a  full 
explanation.  Except  in  the  final  balance  sheet  for  the  fiscal  year, 
the  profit  and  loss  account  should  be  shown  on  both  sides  of  the 
balance  sheet  so  as  to  avoid  any  danger  of  giving  a  false  impression. 
Unless  this  is  done,  a  credit  balance  of  $25,000  might  equally  well 


240  THE  MODERN   TRUST  COMPANY 

represent  a  gain  of  that  amount  or  losses  of  $30,000  offset  by  gains 
of  $55,000. 

"  Expenses."  A  journal  entry  is  made  on  the  last  day  of  each 
month,  charging  "  expenses "  with  the  month's  total  as  shown  by 
the  record  of  expenses  and  crediting  "expenses  payable."  The 
expense  account  is  credited  for  amounts  received  for  check  books, 
printing,  express  charges,  etc.,  as  shown  by  a  petty  cash  receipts 
book,  and  the  balance  of  the  account  is  charged  at  the  end  of  the 
fiscal  year  to  profit  and  loss  account. 

"  Taxes."  On  the  last  day  of  each  month  a  journal  entry  is  made, 
charging  "taxes"  and  crediting  "taxes  payable"  with  one-twelfth 
of  the  approximate  taxes  for  the  year.  The  taxes  account  then 
shows  the  actual  amount  of  taxes  chargeable  against  the  business. 
At  the  close  of  the  fiscal  year  the  total  is  charged  to  profit  and  loss. 

"Accrued  interest  payable"  is  charged  by  cash  entries  with  interest 
paid  to  depositors.  By  journal  entry  at  the  end  of  each  month, 
"interest  paid  depositors"  is  charged  and  "accrued  interest  pay- 
able" is  credited  with  the  amount  of  accrued  interest  as  calculated 
on  the  average  daily  balances  of  total  deposits.  At  the  semi-annual 
interest  periods  the  entry  is  adjusted  to  agree  with  the  amount  of 
interest  actually  paid.  "Interest  paid  depositors"  is  charged  to 
profit  and  loss  at  the  end  of  the  fiscal  year. 

Additional  accounts  which  have  to  be  opened  to  fit  the  require- 
ments of  special  lines  of  business  should  be  made  as  far  as  possible 
to  conform  to  the  general  system. 

The  general  ledger  should  be  closed  only  at  the  end  of  the  fiscal 
year,  when  all  the  balances  of  both  debit  and  credit  income  accounts 
are  transferred  by  journal  entry  to  profit  and  loss,  and  the  balance 
of  profit  and  loss  is  transferred  to  undivided  profits.  In  this  way 
all  the  income  accounts  are  closed  out  preparatory  to  starting  the 
business  of  the  new  fiscal  year. 

Postings  in  the  general  ledger  are  made  from  a  cash  book  and 
journal.  The  cash  book  has  separate  columns  for  the  most  active 
accounts  and  a  miscellaneous  column  for  inactive  accounts.  The 
journal  should  be  small,  as  its  entries  are  comparatively  few.  Most 
journal  entries  are  made  at  the  end  of  each  month  and  the  close  of 
the  fiscal  year.  The  general  ledger  bookkeeper's  work  may  include 
simply  the  books  in  which  the  results  of  the  business  are  assembled, 


GENERAL  ACCOUNTING  241 

or  it  may  be  expedient  also  to  put  under  his  care  some  of  the 
closely  related  sets  of  auxiliary  books  in  which  the  records  of  the 
company's  investments  are  kept. 

The  time  spent  in  taking  off  a  daily  trial  balance  is  more  than 
repaid  by  the  immediate  detection  of  errors.  For  a  small  trust 
company  a  trial  balance  book  or  daily  statement  is  usually  sufficient. 
In  this  the  names  of  the  general  ledger  accounts,  written  or  printed 
in  the  left-hand  margin,  are  followed  by  the  daily  balances  in  a  series 
of  vertical  columns,  one  column  for  each  day.  In  a  large  company, 
where  detailed  information  is  needed,  a  comparative  daily  balance 
sheet  is  more  satisfactory  than  a  simple  trial  balance.  The  sheets, 
kept  in  a  binder  or  on  a  file,  are  bound  at  the  end  of  the  fiscal  period. 
In  the  first  column  are  the  names  of  the  general  ledger  accounts, 
assets  and  liabilities  at  the  top  of  the  sheet,  income  and  expenses  in 
a  separate  section  below.  The  four  cash  columns  show  the  balances 
at  the  close  of  the  previous  day's  business,  the  balances  at  the  close 
of  the  current  day's  business,  and  the  increases  and  decreases  over 
the  previous  day.  Below  the  total  of  assets  is  a  line  for  unet  change 
in  assets."  Yesterday's  total  of  assets  settles  with  to-day's  total  by 
adding  the  net  change  to  the  smaller  of  the  two  totals.  The  gross 
increases  and  decreases  are  also  made  to  settle  by  adding  the  net 
change  to  the  smaller  total.  In  this  way  the  correctness  of  the  post- 
ings is  proved.  Net  earnings  for  the  current  year  appear  as  a  liabil- 
ity. The  totals  of  yesterday's  and  to-day's  liabilities  are  settled 
by  adding  the  net  change,  as  in  the  case  of  assets. 

The  income  and  expenses  section  of  the  balance  sheet  gives  the 
earnings  for  the  current  year  to  the  date  indicated.  The  difference 
between  the  total  income  and  total  expenses  shows  the  amount  of 
undivided  current  earnings.  The  expenses  and  net  earnings  settle 
with  the  gross  income.  Dividends  declared  and  paid  from  current 
earnings  appear  just  above  the  undivided  balance  of  earnings. 

By  the  use  of  a  comparative  daily  balance  sheet,  the  items  which 
change  from  day  to  day  and  the  resulting  balances  are  instantly 
ascertained.  If  a  daily  trial  balance  is  not  taken  off,  the  changes 
in  current  earnings,  deposits,  loans,  and  reserve  are  often  followed 
by  keeping  an  abstract  of  these  accounts. 

A  comparative  monthly  balance  sheet,  showing  the  increases 
and  decreases  of  the  month,  is  also  used.  The  only  difference 


242  THE   MODERN   TRUST   COMPANY 

between  it  and  the  daily  sheet  is  the  color  of  the  paper,  and  the  head- 
ings of  the  increase  and  decrease  columns  with  a  blank  space  for  the 
dates  instead  of  the  word  "yesterday." 

A  simple  monthly  balance  sheet  which  can  be  kept  in  a  small 
binder  and  be  readily  consulted  without  having  to  use  the  large 
comparative  sheets,  is  often  a  convenience.  The  principal  and 
income  sections  are  arranged  in  two  columns ;  in  the  principal  section 
assets  on  the  left  and  liabilities  on  the  right  hand  side  of  the  page, 
and  in  the  income  section  earnings  on  the  right  and  expenses  on  the 
left. 

If  the  cash  book  is  not  readily  available,  a  daily  cash  report 
is  made  out.  The  sheet  is  divided  into  three  columns,  —  for  receipts, 
payments,  and  cash  balance  at  closing.  In  the  first  two  appear  the 
names  of  the  more  active  general  ledger  accounts,  with  blank  spaces 
in  which  the  less  active  accounts  can  be  written.  Under  loans, 
investments,  etc.,  space  is  left  to  show  the  various  items  in  detail. 
The  total  receipts  for  the  day  plus  the  balance  at  opening  settle  with 
the  day's  payments  plus  the  balance  at  closing.  In  the  third  column, 
the  cash  balance  at  closing  is  analyzed  to  show  the  amount  of  notes, 
specie,  and  other  cash  items  in  the  vault  and  the  balance  in  each 
depository.  The  total  deposits  and  percentages  of  reserves  may  also 
be  shown. 

In  reports  to  stockholders  there  should  be  the  fullest  publicity 
consistent  with  the  best  business  interests  of  the  company.  The 
practice  of  mailing  copies  of  the  report  to  the  stockholders  in  advance 
of  the  annual  meeting  is  to  be  commended,  as  the  opportunity  to 
examine  the  figures  beforehand  makes  possible  a  more  intelligent 
discussion  of  them  at  the  time  of  the  meeting.  In  published  reports, 
clear,  condensed  statements  are  better  than  much  detail.  To  make 
it  easy  for  the  stockholders  and  others  to  compare  successive  periods, 
the  form  of  report  should  not  be  changed  without  good  reason. 

In  reports  of  condition  to  the  state  banking  departments,  the  forms 
provided  in  accordance  with  law  must  be  used.  As  these  statements 
are  often  published  either  by  advertisement  or  in  official  reports, 
other  public  statements  may  well  be  based  on  them.  Government 
regulation  of  banking  institutions  has  done  much  in  recent  years 
to  promote  uniformity  in  bookkeeping  methods.  The  names  and 
order  of  the  general  ledger  accounts  may  be  modified  to  suit  the 


GENERAL  ACCOUNTING  243 

forms  required  by  the  authorities,  and  many  tedious  and  elaborate 
calculations  will  be  avoided  if  the  books  are  so  arranged  that  a  state- 
ment of  condition  is  merely  a  copy  of  the  daily  balance  sheet. 

AUDITS  AND   EXAMINATIONS 

Fortunately  most  bank  and  trust  company  officials  are  true  to 
their  trust.  That  more  are  not  so  is,  in  part  at  least,  due  to  the  fact 
that  examinations  of  securities  and  accounts  are  not  made  as  fre- 
quently and  thoroughly  as  they  should  be.  The  community  gives 
but  little  thought  to  the  bank  officer  who,  often  on  a  small  salary 
and  constantly  subject  to  severe  temptation,  works  on  year  after  year 
with  absolute  fidelity.  Occasionally  among  the  thousands  of  such 
men  one  succumbs  to  temptation,  and  the  newspapers  exploit  his 
ruin,  which  not  only  affects  himself  but  often  involves  in  serious 
loss  the  bank  in  which  he  has  been  employed. 

As  all  banks  are  examined  in  some  way  or  other,  the  public,  in 
the  event  of  a  defalcation,  is  too  ready  to  jump  to  the  conclusion  that 
all  examinations  are  ineffective  and  serve  only  to  give  a  false  sense 
of  security.  Those  who  have  devoted  any  study  to  the  subject  know 
that  embezzlements  of  large  amounts  have  occurred,  almost  without 
exception,  in  banks  where,  if  examinations  other  than  those  by 
government  officials  have  been  made  at  all,  they  have  been  perfunc- 
tory and  utterly  inefficient. 

Examinations  of  corporations  doing  a  banking  or  trust  company 
business  are  of  two  quite  separate  and  distinct  kinds:  first,  those 
made  by  representatives  of  a  government  department;  and  second, 
examinations  made  by  or  for  the  directors  and  stockholders. 

The  public  is  more  or  less  familiar  with  the  examinations  of 
national  banks  made  by  examiners  representing  the  Comptroller  of 
the  Currency.  In  most  of  the  states  the  banking  laws  provide  for 
a  commissioner  of  banking,  or  some  similar  official,  who  through 
his  staff  of  examiners  makes  annual  or  semi-annual  examinations 
of  all  trust  companies.  In  addition  to  this  examination,  each  com- 
pany is  required  to  furnish  sworn  statements  of  condition  twice  a 
year,  and  sometimes  oftener,  on  days  named  by  the  state  authorities. 

This  element  of  state  control,  which  is  of  recent  development, 
has  resulted  from  the  rapid  growth  and  increased  importance  of 


244  THE  MODERN  TRUST  COMPANY 

trust  companies,  and  although  opposed  at  first  as  an  infraction  of 
corporate  liberty  it  is  now  generally  recognized  as  both  salutary  and 
necessary.  The  state  banking  departments  have  done  good  service 
in  checking  what  has  seemed  at  times  an  almost  mushroom  growth, 
and  in  forcing  weak  companies  to  take  proper  precautions  to  safe- 
guard the  interests  of  their  customers.  In  comparing  the  system 
of  national  bank  examination  with  the  methods  of  the  state  depart- 
ments, it  must  be  remembered  that  the  national  banking  system 
has  had  more  time  to  develop  and  that  the  trust  companies,  which 
have  been  springing  up  in  such  numbers  of  recent  years,  were  at  first 
almost  without  control,  while  they  exercise  broader  powers  and  are 
more  complex  in  their  organization  than  national  banks,  and  hence 
present  greater  difficulties  to  the  examiner. 

It  is  unfortunate  that  politics  are  so  often  involved  in  the  appoint- 
ment of  examiners,  who  should  always  be  trained  men  chosen  for 
fitness  alone.  The  examiner  who  begged  a  bank  officer  he  was  sup- 
posed to  be  examining  to  ugo  easy"  with  him  as  he  had  just  been 
transferred  from  the  position  of  oleomargarine  inspector  for  the  dairy 
commissioner,  appreciated  the  humor  of  the  situation  and  took  the 
only  possible  steps  to  secure  a  first  lesson  in  banking. 

The  officers  of  the  state  banking  departments,  whether  experts  or 
not,  should  have  the  good-will  and  cooperation  of  the  trust  compa- 
nies under  their  jurisdiction,  with  resulting  advantages  to  both.  At 
the  same  time,  the  public  as  well  as  the  directors  of  trust  companies 
should  bear  in  mind  that  examinations  made  by  government  officials 
do  not  have  for  their  primary  object  the  detection  of  clerical  errors 
or  of  any  except  gross  frauds.  These  examiners  are  employed  to 
ascertain  that  the  bank  or  trust  company  is  doing  business  according 
to  the  laws  under  which  it  is  chartered,  and  that  it  is  not  assuming 
functions  or  authority  not  granted  to  it.  Further  than  this,  the 
government  examiner,  whether  state  or  national,  usually  counts  the 
cash  and  examines  the  securities  owned  by  the  bank  or  held  as  col- 
lateral for  loans,  or,  in  the  case  of  a  trust  company,  held  for  the 
accounts  in  its  trust  department.  They  usually  reconcile  some  of 
the  more  important  accounts  and  make  an  examination  that  is, 
upon  the  whole,  quite  sufficient  for  the  purposes  of  the  government, 
which  does  not  in  any  sense  undertake  to  act  as  an  insurance  com- 
pany to  protect  stockholders  and  depositors  from  a  loss  of  their 


GENERAL   ACCOUNTING  24$ 

investments.  Government  examiners  have  discovered  many  em- 
bezzlements, and,  so  far  as  the  time  at  their  command  and  the  duties 
they  are  required  to  discharge  will  permit,  they  as  a  rule  faithfully 
endeavor  to  protect  the  bank  from  loss  wherever  it  may  arise.  It 
should,  however,  be  recognized,  as  is  frankly  conceded  by  the  best 
examiners  themselves,  that  their  work,  though  valuable,  is  entirely 
insufficient  for  the  protection  of  the  stockholders  and  the  public. 

In  recognition  of  the  necessity  for  other  examinations,  most  banks 
and  trust  companies  provide  for  examinations  to  be  made  annually, 
or  more  often,  by  the  members  of  their  board,  by  a  committee  of  stock- 
holders outside  of  the  board,  or  by  professional  accountants  —  some- 
times by  a  combination  of  two  of  these  plans. 

To  be  effective,  the  audit  of  a  trust  company  must  be  made  by 
some  one  reasonably  familiar  with  the  business  of  such  a  company, 
and  with  the  methods  usually  found  in  such  institutions.  In  addition 
to  this,  a  comprehensive  knowledge  of  accounts  is  essential,  for  only 
such  training  can  give  an  examiner  a  proper  grasp  of  the  problems 
confronting  him.  The  examiner  should  always  keep  in  mind  that 
the  officers  and  employees  of  the  institution  he  is  examining  are  sup- 
posed to  be  honest,  and  should  be  treated  accordingly;  but  at  the 
same  time  he  should  never  for  a  moment  lose  sight  of  the  fact  that 
his  work  is  to  discover  error  or  fraud  if  it  exists,  and  to  produce  such 
a  moral  effect  upon  those  engaged  in  the  bank  or  trust  company  as 
will  deter  them  from  carelessness  or  wrong-doing. 

The  man  who  contemplates  stealing  the  funds  of  the  bank  in 
which  he  is  employed,  is  desirous  most  of  all  of  hiding  his  dishonesty, 
and  in  this  he  has  the  advantage  of  the  examiner,  inasmuch  as  he  is 
working  upon  inside  lines  and  has  plenty  of  opportunity  to  study  the 
methods  of  the  examiner  and  to  contrive  means  of  circumventing 
him.  It  is  not  very  difficult  to  discover  the  thief  after  he  has  wrecked 
the  bank,  but  the  ideal  examination  will  reveal  stealings  in  their 
incipient  stage,  and  will  make  any  successful  manipulation  of  the 
bank's  accounts  so  difficult  and  so  certain  of  speedy  detection  that 
none  but  a  reckless  criminal  would  undertake  it. 

A  good  examination  of  a  bank  or  trust  company  can  be  made  by 
the  board  of  directors,  provided  it  is  composed  of  men  with  ample 
time  at  their  command  and  with  sufficient  technical  knowledge  and 
experience  in  accounting  and  banking  methods,  who  are  willing  to 


246  THE  MODERN   TRUST  COMPANY 

devote  themselves  to  the  work.  An  examination  made  by  such  men 
is  not  only  good  for  the  bank,  but  is  also  good  for  them  as  directors, 
in  that  it  brings  them  into  personal  touch  with  the  securities,  records, 
and  employees  of  the  institution  in  a  way  not  otherwise  possible. 
The  knowledge  they  acquire  in  the  ordinary  course  of  business  as 
directors  is  helpful  to  them  in  making  the  examination  and  enables 
them  quickly  to  understand  entries  upon  the  books. 

An  examination  made  by  a  board  of  directors  may,  on  the  other 
hand,  by  reason  of  lack  of  time  or  of  technical  skill,  or  both,  be  of 
little  real  value,  causing  trifling  uneasiness  to  a  dishonest  employee 
and  failing  utterly  to  command  the  respect  of  men  responsible  for 
the  property  and  accounts  under  examination.  Directors  who 
count  merely  the  cash  and  securities  put  before  them,  and  compare 
them  only  with  the  accompanying  statement  with  which  in  any 
event  the  items  are  bound  to  agree,  and  who  do  not  also  carefully  verify 
the  records  of  the  company  to  prove  that  all  the  property  and  earn- 
ings are  being  fully  and  clearly  accounted  for,  are  indulging  in  a 
solemn  farce  and  almost  putting  a  premium  upon  carelessness  and 
dishonesty. 

The  strongest  argument  against  examinations  by  directors  is  the 
fact  that  men  of  affairs  may  not  be  familiar  with  accounting  methods 
or  accustomed  to  handling  cash  or  examining  securities,  and  so  may 
fail  to  recognize  errors  which  would  be  readily  detected  by  a  trained 
accountant. 

Examinations  made  by  stockholders  outside  of  the  board  of 
directors  are  open  to  much  the  same  objections  as  examinations  made 
by  directors,  and  are  subject  to  the  further  criticism  that  the  stock- 
holder does  not  even  possess  the  director's  personal  knowledge  of 
the  company's  business.  If,  however,  a  committee  of  stockholders 
can  be  secured,  consisting  of  men  who  are  familiar  with  banking 
practices,  and  who  are  accustomed  to  dealing  with  accounts,  an  exami- 
nation thoroughly  made  by  them  may  be  very  valuable. 

Directors  of  financial  corporations  are  often  busy  men  engrossed  by 
interests  other  than  those  of  the  institutions  which  they  are  called  on 
to  direct.  They  are  conscious  that  they  lack  the  required  skill,  and 
that  in  any  event  the  demands  upon  their  time  preclude  the  possibility 
of  their  making  a  thorough  examination.  At  the  same  time,  such 
men  usually  realize  very  keenly  the  responsibility  resting  upon  them, 


GENERAL  ACCOUNTING  247 

and  are  most  desirous  that  the  funds  of  the  corporation  shall  be  care- 
fully safeguarded.  They  also  feel  that  an  obligation  rests  upon  them 
to  remove  so  far  as  possible  all  temptations  from  the  officers  and  em- 
ployees engaged  by  them.  It  is  their  desire  that  their  company  shall 
conduct  its  business  expeditiously  and  economically,  and  at  the  same 
time  keep  an  absolutely  accurate  record  of  its  transactions.  Such 
directors,  realizing  their  inability  to  deal  with  the  situation  in  person, 
do  what  they  are  accustomed  to  do  in  their  own  business  affairs  when 
they  find  themselves  similarly  situated  —  they  look  for  some  one  who 
can  make  the  examination  for  them.  It  has  consequently  come  to 
be  a  common  practice  for  directors  of  large  institutions  to  delegate  the 
work  of  examinations  wholly  or  in  part  to  public  accountants. 

As  legislation  is  now  providing  a  body  of  certified  public  ac- 
countants in  the  leading  states,  who  after  fulfilling  rigid  legal  require- 
ments are  duly  admitted  to  the  practice  of  their  profession,  and  who 
are  subject  to  severe  penalties  in  the  event  of  delinquency,  it  is  com- 
paratively easy  to  distinguish  between  capable,  responsible  account- 
ants and  those  not  so  qualified.  A  certified  public  accountant 
in  active  practice  is  almost  certain  to  have  not  only  a  good 
knowledge  of  banking  and  of  the  requirements  of  the  courts  in 
respect  to  accounts,  but  also  a  knowledge  of  general  business  that 
is  most  useful  in  examining  a  trust  company.  He  is  accustomed  to 
confidential  relations,  and  his  position  in  his  profession  and  in  the 
business  community  is  directly  contingent  upon  the  faithful  discharge 
of  his  obligations. 

Recently  a  few  banks  and  trust  companies  in  this  country  have 
adopted  the  practice  of  printing  a  public  accountant's  certificate 
in  their  published  reports.  This  is  in  keeping  with  a  custom  that  is 
growing  among  other  classes  of  corporations  in  this  country,  and  that 
is  almost  universal  in  Great  Britain.  Present  tendencies  point  to  its 
becoming  generally  expected  by  the  business  public,  just  as  banking 
houses  are  now  laying  stress  upon  an  accountant's  certificate  as  to  a 
customer's  financial  statement  when  presented  as  a  basis  for  credit. 

In  many  respects  the  best  examination  of  a  trust  company  is  one 
made  semi-annually  or  quarterly  by  the  board  of  directors  and  a 
certified  public  accountant,  in  which  the  directors  and  the  accountant 
work  together  in  counting  the  cash  and  securities,  thus  enabling  the 
directors  to  see  the  actual  assets,  while  the  accountant  and  his  assist- 


248  THE  MODERN  TRUST  COMPANY 

ants  complete  the  examination  by  verifying  the  book  entries  and 
accounts.  In  addition  to  these  semi-annual  examinations,  a  certi- 
fied public  accountant  should  be  authorized  to  make  more  frequent 
examinations  of  the  accounts  of  one  or  more  departments  at  a  time, 
without  previous  notice  to  any  one  in  the  company. 

To  discharge  their  duty  to  the  stockholders  whom  they  represent, 
to  the  public  whose  confidence  they  solicit,  and  to  the  officers  and 
employees  of  whom  they  require  the  utmost  fidelity,  the  directors 
of  every  trust  company  must  see  that  a  simple  but  adequate  system 
of  accounts  is  used  and  insist  upon  frequent  and  thorough  examina- 
tions of  the  assets  and  records. 


CHAPTER  XIII 

MISCELLANEOUS   SUBJECTS 
CORRESPONDENCE  OR  MAIL  ROOM 

IN  a  small  company  the  care  of  correspondence  presents  no  dim- 
cult  problems.  With  the  increase  of  business,  complications  arise 
which  may  result  in  confusion,  error,  and  needless  expense  unless 
systematic  methods  are  introduced. 

The  oversight  of  the  mail  is  usually  in  the  hands  of  the  secretary, 
the  details  in  a  large  office  being  cared  for  by  a  special  force  of 
assistants. 

To  secure  the  greatest  economy  of  time  and  space,  a  uniform 
system  should  obtain  throughout  the  entire  office.  While  each  depart- 
ment should  have  its  mail  so  handled  as  to  meet  its  particular  needs, 
the  methods  used  should  be  in  harmony  with  the  general  system  of 
dealing  with  the  correspondence  of  the  entire  establishment.  Even 
in  a  small  company  it  is  well  to  inaugurate  a  simple  system  capable 
of  expansion. 

When  the  size  of  the  company  is  large  enough  to  warrant  it,  there 
should  be  a  special  mail  room,  in  which  all  mail  is  received  and 
sorted,  to  which  all  out-going  letters  are  sent  to  be  copied,  sealed, 
and  mailed,  and  where  all  correspondence  is  filed.  Letters  should  not 
be  allowed  to  accumulate  either  on  the  desks  or  in  the  mail  room. 
The  finished  matter  of  the  previous  day  should  be  regularly  collected 
and  promptly  filed.  When  letters  are  borrowed  from  the  files,  receipts 
should  be  taken  and  deposited  in  place  of  the  missing  letters. 

Whether  the  typewriting  should  be  done  in  the  mail  room  is  a 
question  to  be  determined  by  the  exigencies  of  each  case.  With  a 
limited  force  of  stenographers  more  can  be  accomplished  by  having 
them  together,  under  the  direction  of  a  chief  operator  who  is  held 
responsible  for  all  the  work.  The  other  method,  usually  more  satis- 
factory to  the  officers  of  a  company,  is  to  have  stenographers  attached 
to  each  department,  who  send  their  letters,  after  being  signed,  to  the 

249 


2$0  THE  MODERN   TRUST   COMPANY 

mail  room.  Such  an  arrangement  saves  the  officers'  time,  as  the 
stenographers  are  at  hand  when  needed,  and  can  be  made  use  of  in 
many  ways  besides  taking  dictation.  The  stenographer  often  occu- 
pies the  post  of  private  secretary,  and  is  a  very  important  part  of 
the  office  force. 

To  save  time,  the  phonograph  can  be  used  for  the  purpose  of 
dictation.  The  officer  dictates  to  the  machine  as  he  finds  oppor- 
tunity, and  the  operator  sets  the  phonograph  at  a  convenient  speed 
and  typewrites  directly  from  it  without  taking  down  the  dictation  in 
shorthand. 

Other  labor-saving  devices  should  be  introduced  whenever  they 
will  facilitate  the  work.  Duplicating  systems  are  essential  where 
many  copies  of  letters  or  accounts  must  be  made;  and  where  the 
same  lists  of  names  are  repeatedly  used  for  mailing  purposes, 
mechanical  addressing  systems  should  be  used. 

An  ample  force  of  stenographers  should  always  be  employed  in 
order  to  save  the  time  of  officers  and  clerks,  which  can  be  used  to 
better  advantage  in  other  ways.  With  the  introduction  of  loose- 
leaf  books  and  book  typewriters,  it  is  becoming  more  general  to 
have  book  entries  and  card  index  records  made  on  the  typewriter, 
because  there  is  less  liability  to  error  than  in  written  entries,  and  the 
results  are  neater  and  often  more  legible. 

All  incoming  mail  matter  is  delivered  to  the  secretary  or  his 
assistants.  It  is  first  sorted,  and  all  specially  addressed  matter  is 
sent  to  the  proper  departments  without  being  opened.  The  general 
mail  is  then  opened,  examined,  and  distributed.  Where  this  work 
is  performed  by  assistants,  more  or  less  complete  records  may  be  kept 
of  both  incoming  and  outgoing  mail.  Enclosures  are  often  noted 
and  recorded,  in  order  to  prevent  loss  and  any  question  of  divided 
responsibility.  A  special  record  of  incoming  as  well  as  outgoing 
registered  mail  is  kept,  and  the  receipts  covering  these  items  are  filed. 
In  some  very  large  organizations  each  letter  is  followed  up,  and  if 
an  acknowledgment  or  answer  is  not  returned  for  mailing  within 
a  reasonable  time,  the  cause  of  delay  is  investigated.  In  most  trust 
companies  it  is  not  necessary  to  have  such  elaborate  systems  as  are 
needed  in  large  mercantile  establishments  receiving  and  mailing 
hundreds  or  even  thousands  of  letters  each  day. 

Outgoing  letters  originate  in  the  various  departments,  and  after 


MISCELLANEOUS   SUBJECTS  251 

being  signed  are  sent  to  the  mail  room  where  they  are  copied.  This  is 
now  usually  done  on  a  roller  copier  instead  of  in  a  letter  book.  The 
roller  copier  not  only  is  more  rapid,  but  renders  less  likely  any 
smearing  of  the  letter  in  copying,  and  makes  it  possible  to  file  letters 
and  answers  together,  obviating  the  necessity  of  long  hunts  through 
the  indexes  of  various  letter  books  to  find  a  needed  letter.  Some- 
times a  carbon  copy  is  made  for  filing  purposes  and  the  letter  itself 
is  not  copied. 

Where  there  is  a  large  outgoing  mail,  originating  in  various  de- 
partments, it  may  be  advisable  after  copying  the  letters  to  place 
them  in  alphabetical  order  in  a  sorting  tray  so  that  all  letters  to 
one  correspondent  may  be  sent  out  in  a  single  cover.  This  simple 
device  will  in  a  large  office  save  a  surprising  number  of  postage 
stamps  and  envelopes.  The  fact  that  one  stamp  box  is  used  for  the 
entire  office,  instead  of  having  a  separate  supply  of  stamps  on  each 
desk,  also  leads  to  economy. 

After  the  letters  are  inserted,  the  envelopes  are  put  through  a 
sealing  machine,  run  either  by  hand  or  by  electricity.  These  ma- 
chines automatically  moisten  the  flap,  and  then  pass  the  envelope 
through  rollers  under  enough  pressure  to  seal  them  securely.  The 
envelopes  are  sealed  as  rapidly  as  they  can  be  fed  into  the  machine. 

Various  filing  systems  are  in  use  —  all  of  them  an  evolution  from 
the  carefully  folded  and  docketed  packages  of  a  generation  ago. 

For  the  business  of  a  trust  company  the  numerical  vertical  system 
is  the  most  satisfactory,  being  the  one  most  easily  adapted  to  the 
demands  of  the  various  departments  and  their  individual  require- 
ments. The  letters  and  copies  of  answers  are  filed  in  manila  folders, 
10"  x  12",  which  are  placed  on  edge,  open  side  up,  in  file- 
drawers.  Each  folder  bears  a  number,  and  guide  cards  separate 
them  by  twenties  so  that  any  folder  is  immediately  located  in  the 
file-drawers,  which  also  bear  labels  indicating  the  numbers  of  the 
folders  they  contain. 

Each  new  correspondent  is  given  an  accession  number,  and  a  card 
bearing  that  number  is  made  out  with  his  name  and  placed  in  the 
finding-index  in  alphabetical  order,  his  correspondence  being  placed 
in  the  folder  bearing  the  same  number.  A  card  once  placed  in  the 
finding-index  is  never  destroyed.  Cross  index  cards  should  be  used 
whenever  necessary. 


252  THE   MODERN   TRUST   COMPANY 

The  advantages  of  the  vertical  system  are  too  numerous  to 
mention,  but  some  of  the  more  important  features  will  commend 
themselves  to  the  busy  man.  He  finds  in  his  mail  a  letter  from  some 
individual  or  company,  whose  previous  correspondence  he  wishes 
to  consult.  The  file  clerk  brings  him  the  folio  entire.  As  he  opens  it 
on  his  own  desk  the  latest  letter  from  or  to  his  correspondent  is  on 
the  top,  and  as  he  turns  the  letters,  just  as  one  would  turn  the  pages 
of  a  book,  he  finds  in  chronological  order  all  communications  in 
reference  to  the  correspondent  in  question.  As  examples  of  what 
may  be  done  with  this  system,  a  few  very  usual  cases  may  be  cited. 

John  Doe  is  a  depositor.  He  sends  deposits  by  mail.  On  the 
receipt  of  his  first  letter  he  is  given  card  and  folder  No.  377  (there 
being  already  three  hundred  and  seventy-six  cards  and  folders  in 
use  for  other  correspondents),  and  his  letter  and  the  copy  of  its 
acknowledgment  are  filed  in  folder  No.  377,  his  card  taking  the 
proper  place  in  the  finding-index.  The  X.  and  Y.  R.  R.  Co.  inquire 
as  to  Mr.  Doe's  standing.  The  trust  company  replies,  and  since 
their  interest  is  in  John  Doe  in  this  matter,  the  X.  and  Y.  R.  R.  Co.'s 
letter  and  answer  are  filed  in  folder  No.  377,  the  signature  of  the 
R.  R.  Co.'s  letter  being  ignored.  He  may  also  be  a  member  of 
the  firm  of  Doe  and  Roe,  Bankers,  who  have  a  loan  account  with 
the  trust  company.  They  have  previously  been  assigned,  let  us  say, 
folder  No.  206.  In  this  folder  may  be  found  their  correspondence, 
and  a  folder  following  it  and  called  No.  206  A  contains  their 
signed  slips  showing  changes  in  collateral.  Should  a  question  arise 
at  any  time  in  regard  to  their  loans,  the  contents  of  this  folder 
will  materially  assist  in  establishing  the  facts.  Doe  and  Roe  send 
the  trust  company  a  deposit  with  the  request  that  it  be  credited  to 
John  Doe.  They  thereby  become,  as  far  as  correspondence  is  con- 
cerned, merely  middlemen,  and  as  in  the  case  of  the  X.  and  Y.  R.  R. 
Co.,  this  request  and  the  copy  of  the  acknowledgment  of  deposit  are 
filed  under  John  Doe's  number  —  377. 

Another  case  might  differ  a  little,  as  follows.  The  trust  com- 
pany is  buying,  through  several  brokers,  various  securities.  The 
interest  of  the  trust  company  is  then,  of  course,  centred  in  the  secu- 
rity and  not  in  any  one  of  the  firms  who  may  chance  to  have  taken 
its  order.  It  may  then  be  to  advantage  to  have  a  set  of  folders 
bearing  a  number  with  an  added  letter.  A  card  in  the  finding-index 


MISCELLANEOUS  SUBJECTS  253 

bears  the  name  "securities"  and  the  number  350.  In  the  filing- 
drawer  may  be  found  folders  No.  350  A,  350  B,  350  C,  and  so  on; 
or  if  26  divisions  are  unnecessary,  the  alphabet  may  be  divided  to  suit 
the  case,  as  few  as  three  divisions  being  sometimes  sufficient,  as 
350  A-F,  350  G-N,  350  O-Z.  Thus,  if  Doe  and  Roe  buy  for  the 
trust  company  certain  securities  of  the  Y.  and  Z.  R.  R.  Co.,  they  are 
evidently  acting,  again  from  a  correspondence  standpoint,  as  middle- 
men; and  the  Y.  and  Z.  R.  R.  Co.,  being  the  security  in  which  the 
trust  company  is  interested,  any  correspondence  in  regard  to  it  from 
Doe  and  Roe  or  others  may  be  found  under  "Securities,"  folder  350, 
and  in  its  proper  alphabetical  subdivision. 

Letters  regarding  syndicates  in  which  the  company  participates 
will  be  most  advantageously  handled  in  like  manner,  and,  in  fact, 
filing  by  subject  may  be  carried  as  far  as  is  deemed  expedient.  Care 
should  be  taken,  however,  to  file  in  this  way  only  when  the  subject 
is  more  important  than  the  name  of  the  correspondent,  and  when 
all  papers  in  regard  to  a  given  subject  or  of  a  similar  character  are 
more  frequently  wanted  than  the  letters  of  each  correspondent. 

Under  one  number  sets  of  folders  with  alphabetical  subdivisions 
may  be  given  to  such  general  heads  as  "Applications  for  Positions 
with  the  Company,"  "Applications  for  Mortgages,  Declined,"  "Mis- 
cellaneous Inquiries,"  and  so  on.  Under  these  and  other  heads  a 
great  deal  of  the  flotsam  and  jetsam  of  correspondence,  which  more 
than  likely  will  not  again  be  consulted  after  the  first  handling,  may 
be  safely  filed.  The  advantage,  for  instance,  of  having  all  applicants' 
letters  concentrated  would  be  appreciated  if  an  extra  clerk  were  needed 
at  a  moment's  notice.  Instead  of  looking  through  the  old  style  alpha- 
betical file  for  half-forgotten  names,  appended  to  letters  of  wholly 
forgotten  dates,  within  half  a  minute  the  entire  correspondence  of 
applicants  may  be  laid  before  the  officer  desiring  it,  and  he  then 
may  run  through  it  in  a  few  minutes  more,  and  select  the  desired 
papers. 

These  examples  serve  to  illustrate  some  of  the  methods  which 
may  be  used  in  general  correspondence.  Different  companies,  how- 
ever, are  sure  to  have  different  needs,  and  variations  of  the  cases 
noted  above,  as  well  as  entirely  new  problems,  will  be  easy  of  solution 
where  numerical  vertical  filing  is  used,  the  object  in  view  being 
always  so  to  file  the  correspondence  that  it  may  be  easily  located  and 


254  THE   MODERN   TRUST   COMPANY 

consulted  without  unduly  increasing  the  size  of  the  finding-index  or 
letter  files. 

Trust  letters  should  be  filed  separately  from  general  correspon- 
dence. In  a  previous  chapter  the  value  of  having  an  accession  number 
for  each  trust  account  opened  is  spoken  of.  This  number  obtains 
wherever  mention  of  the  account  is  made,  and  it  should  also  be  used 
as  a  filing  number  for  trust  letters.  It  is  easy  for  those  answering 
trust  correspondence  to  note  on  every  letter  received  or  sent  the 
number  of  the  trust  or  trusts  to  which  it  refers.  This  makes  imme- 
diate filing  of  the  letters  possible  in  the  filing  room ;  and  to  consult 
them  again  it  is  only  necessary  to  use  the  index  of  trust  accounts  as 
a  finding-index.  In  case  a  letter  bears  two  or  more  trust  numbers, 
it  is  filed  under  the  lowest  number,  and  a  "dummy"  sheet,  printed 
for  the  purpose,  is  filed  in  the  folder  bearing  the  higher  number  and 
refers  back  to  the  lower  number.  A  cross  index  of  correspondents, 
made  up  largely  of  beneficiaries,  may  be  used  to  advantage.  A  dupli- 
cate of  this  index  should  be  in  the  hands  of  the  remittance  clerk. 
Copies  of  accounts  and  statements  are  placed  in  separate  folders  fol- 
lowing those  containing  the  correspondence  in  regard  to  the  trust. 
The  folders  containing  the  accounts  may  be  made  of  a  different  color. 
As  in  other  varieties  of  correspondence,  it  will  be  found  expedient 
to  divide  some  folders  into  alphabetical  sets  with  a  small  or  large 
number  of  divisions  to  meet  the  needs  of  the  case.  Letters  in  regard 
to  trusts  not  yet  formed,  but  about  which  there  is  preliminary  corre- 
spondence, should  be  filed  in  an  alphabetical  set  under  No.  o,  signify- 
ing that  no  number  has  yet  been  assigned.  As  the  new  trusts  receive 
accession  numbers,  these  letters  are  weeded  out  and  properly  filed. 

The  real  estate  departments  of  some  trust  companies  care  for 
large  numbers  of  properties,  and  improved  properties  must  be 
kept  tenanted  and  in  repair.  One  or  more  drawers  of  the  vertical 
file  may  be  given  over  to  all  correspondence  in  this  connection,  and 
to  make  these  letters  easy  of  access,  as  well  as  to  economize  space 
and  time,  they  should  be  filed  under  the  name  of  the  property.  In 
the  real  estate  finding-index  the  main  divisions  are  by  states,  with 
subdivisions  of  county,  town,  street,  and  finally  street  numbers  in 
numerical  sequence.  To  find  the  entire  correspondence  relating  to  a 
given  property,  including  letters  from  tenants,  inquiries  from  pro- 
spective tenants,  letters  from  carpenters  and  other  mechanics,  notices 


MISCELLANEOUS   SUBJECTS  255 

from  city  authorities,  inquiries  from  the  owners  for  whom  the  com- 
pany is  acting,  and  the  copies  of  replies  to  all  these,  one  folder  is  con- 
sulted. To  locate  this  folder  one  has  only  to  find  the  property  on 
its  card,  which  bears  the  folder  number,  as  in  the  general  corre- 
spondence. In  half  a  minute  again  the  officer  desiring  it  has  laid 
before  him  all  communications  referring  to  the  property  in  question. 
Tenants  change,  mechanics  change,  several  part  owners  write,  and 
so  on,  but  the  property  always  retains  the  folder  number  first  given  it. 

The  mortgage  correspondence  may  also  be  handled  in  the  same 
way,  since  the  only  sure  way  of  locating  mortgage  letters  is  by  prop- 
erty. Both  interest  payer  and  mortgage  owner  may  change  as  in 
the  case  of  a  mortgage  sold  by  one  trust  account  and  bought  by  an- 
other, or  the  sale  of  a  property  subject  to  a  mortgage;  but  the 
property  number  remains  the  same,  and  makes  possible  immediate 
consultation  of  all  the  correspondence. 

Transferring  is  a  very  simple  matter  under  the  vertical  system. 
As  folders  get  unwieldy  or  the  current  files  are  filled,  the  correspon- 
dence is  transferred  to  pasteboard  boxes,  10"  x  12"  x  3".  These 
boxes  are  placed  on  shelves  in  the  correspondence  room,  and  should 
be  readily  accessible.  A  label  on  the  outside  of  each  box  indicates 
the  numbers  of  the  folders  which  it  contains,  and  where  a  single  num- 
ber occupies  more  than  one  box,  the  dates  included  in  each  are  shown. 
Correspondence  more  than  a  year  old  can  safely  be  transferred.  At 
least  a  year's  letters  should  be  left  in  the  current  files,  except  when 
the  correspondence  is  too  voluminous  or  when  the  account  is  closed. 
The  folder  in  the  current  file  is  stamped  to  show  to  what  date  the 
correspondence  has  been  transferred.  As  a  transfer  box  becomes 
full,  another  is  placed  beside  it,  to  contain  the  additional  matter. 
For  the  general  correspondence  of  a  trust  company  this  is  more 
satisfactory  than  transferring  all  the  letters  of  a  given  period,  as  it 
preserves  the  continuity  of  all  correspondence,  a  given  number  ap- 
pearing in  its  proper  place  in  both  current  and  transfer  files,  and 
making  it  easy  to  locate  letters  of  any  date. 

The  above  gives  a  working  plan  for  handling  the  correspon- 
dence of  the  average  company.  The  success  of  any  filing  system 
depends  in  large  measure  upon  the  intelligence  of  those  who  are 
actually  doing  the  work.  When  one  remembers  that  quickness  in 
filing  a  letter  does  not  necessarily  insure  ease  in  finding  it,  the  care 


256  THE  MODERN  TRUST  COMPANY 

and  time  taken  in  establishing  and  carrying  out  a  suitable  system 
seem  amply  justified. 

CLERICAL  FORCE 

There  is  no  position  in  a  trust  company  so  humble  as  not  to  demand 
serious  consideration  of  the  character  of  the  man  who  is  to  fill  it. 
Where  money  values  are  so  constantly  dealt  with,  either  directly  or 
indirectly,  honesty  is  always  the  first  qualification.  Education  and  pre- 
vious occupations  come  next  in  importance.  The  general  impression 
that  no  previous  training  is  needed,  that  the  bank  or  trust  company 
is  an  asylum  for  poor  relatives  or  luckless  failures,  is  not  shared 
by  officers  who  have  conducted  an  involuntary  kindergarten  and 
attempted  to  pound  into  shape  the  raw  material  thrust  upon  them 
by  importunate  directors,  stockholders,  or  clients.  There  is  no  room 
for  "influence"  in  trust  company  appointments. 

Home  surroundings  are  often  the  best  index  to  personal  character, 
and  a  good  name  is  not  to  be  despised  as  a  restraint  from  temptation 
and  a  spur  to  healthy  ambition.  The  manners  and  general  appear- 
ance of  the  office  force  have  their  bearing  on  the  business.  Hand- 
writing —  an  almost  neglected  art  outside  the  public  schools  —  may 
settle  the  question  of  a  clerk's  promotion.  On  the  whole,  the  man 
with  college  training,  particularly  if  he  is  dependent  on  his  own  exer- 
tions, is  the  best  type  for  trust  company  positions.  Technical  knowl- 
edge is  easily  supplied  if  earlier  training  has  given  the  broad  outlook 
and  mental  grasp  which  fit  a  man  to  rise  to  posts  of  responsibility. 

Banking  has  been  one  of  the  last  fields  to  be  invaded  by  women. 
The  stenographer  was  the  entering  wedge,  and  many  other  positions 
have  since  been  captured.  It  is  after  all  not  so  much  a  question  of 
sex  as  of  qualifications.  There  is  no  more  room  for  the  untrained 
woman  in  a  trust  company  than  there  is  for  the  untrained  man. 

Employees  are  now  almost  universally  required  to  furnish  bonds 
for  the  faithful  performance  of  their  duties.  These  may  be  either 
personal  bonds  given  by  the  employee  and  some  relative  or  other 
individual  who  goes  surety  for  him,  or  the  obligation  of  a  surety  com- 
pany. The  surety  company's  bond  is  rapidly  superseding  the  per- 
sonal bond.  The  employer  often  pays  the  premiums.  The  surety 
companies  examine  carefully  the  history  and  character  of  the  em- 


MISCELLANEOUS   SUBJECTS  257 

ployee,  and  keep  more  or  less  closely  in  touch  with  their  "risks," 
as  occasion  may  require.  The  better  companies  pay  losses  promptly 
and  use  every  effort  to  secure  the  conviction  of  wrong-doers,  and  this 
in  itself  acts  as  a  powerful  deterrent.  They  also  take  the  respon- 
sibility of  investigating  the  conduct  of  employees,  and  their  cancel- 
lation of  a  risk  or  refusal  to  renew  a  bond  is  sufficient  reason  for 
dismissal. 

To  get  the  best  work  from  employees,  strict  and  impartial  disci- 
pline must  be  combined  with  liberal  treatment  and  the  prospect 
of  deserved  promotion.  Salaries  are  based  on  the  position  and 
on  the  length  of  service.  The  trust  company  should  protect  itself 
not  only  by  surrounding  its  employees  with  every  safeguard,  but  by 
paying  salaries  on  which  they  can  live  decently.  Every  employee 
should  be  prohibited  from  stock  or  other  speculation,  and  an  infrac- 
tion of  this  rule  should  be  adequate  cause  for  dismissal.  Promotions 
should  be  governed  by -civil  service  principles  in  a  trust  company 
as  much  as  in  a  government  department.  The  system  should,  how- 
ever, be  elastic,  and  care  should  be  taken  not  to  promote  unless  the 
employee  is  well  qualified  for  the  higher  post. 

" Anybody  can  do  twelve  months'  work  in  eleven  months;  nobody 
can  do  twelve  months'  work  in  twelve  months."  Mental  work  to  be 
well  done  requires  a  definite  amount  of  relaxation  far  greater  than  is 
required  in  the  performance  of  mere  physical  labor.  In  the  keen 
competition  and  busy  life  of  this  country  it  is  seldom  realized  how 
necessary  rest  is  for  those  who  do  exacting  mental  work,  and  par- 
ticularly for  those  who  hold  positions  of  responsibility.  In  trust 
companies  regular  attendance  should  be  required  when  on  duty, 
and  liberal  vacations  should  be  given,  both  for  the  sake  of  the  employee 
and  as  a  protection  to  the  company.  The  clerk  who  is  never  willing 
to  be  absent  needs  watching.  A  well-known  firm  requires  each  of 
its  office  employees  to  take  a  day  off  duty  each  month,  when  all  per- 
sonal and  private  affairs  must  be  attended  to.  One  of  the  advantages 
of  this  plan  is  that,  in  substituting,  the  employees  have  frequent  oppor- 
tunity to  examine  and  become  familiar  with  each  other's  work. 
Vacations  should  be  graded  first  as  to  the  position  held,  and  sec- 
ondly as  to  length  of  service.  It  goes  without  saying  that  the  officer 
who  is  responsible  for  the  conduct  of  the  business  needs  more  time 
off  duty  than  the  clerk  who  leaves  all  thought  of  work  behind  him 


258  THE  MODERN   TRUST  COMPANY 

when  he  closes  his  ledger.    The  best  officers  are  not  those  who  stick 
too  closely  to  their  desks. 

Civil  pensions  which  in  Europe  are  so  common  are  gradually 
being  adopted  by  many  business  houses  in  this  country.  To  keep 
up  an  effective  organization  and  progressive  methods,  a  trust  com- 
pany, like  an  army,  must  provide  some  plan  of  compulsory  retire- 
ment. The  system  should  be  based  on  the  position  held  at  the  time 
of  retirement,  age,  and  length  of  service.  The  rules  governing  officers 
and  clerks  should  vary  according  to  the  requirements  of  each  class. 
Compulsory  retirement  sometimes  causes  the  loss  of  valuable  em- 
ployees, but  these  are  few  in  proportion  to  the  total  number  retired, 
and  there  is  usually  an  actual  saving  in  salaries. 

MESSENGERS,  WATCHMEN,  AND   CLEANERS 

The  entrance  of  every  trust  company  should  be  guarded  by  an 
adequate  force  of  efficient  watchmen,  who  can  assist  and  direct 
customers,  and  exclude  pedlers,  book  agents,  and  other  undesirable 
visitors. 

A  Western  trust  company  keeps  tally  of  all  visitors  by  requiring 
the  watchman  at  the  doorway  to  hold  in  his  hand  an  automatic  count- 
ing device,  which  he  presses  each  time  any  one  enters  the  building. 
The  total  is  reported  to  the  president  on  the  summary  of  each  day's 
business.  The  record  itself  is  not  so  valuable  as  the  fact  that  it 
lessens  the  possibility  of  any  one  being  able  to  slip  in  unnoticed. 

In  addition  to  the  force  of  watchmen  stationed  at  the  entrance  of 
the  building  and  in  the  various  departments,  there  should  be  a  sufficient 
number  of  messengers.  These  may  be  either  boys  specially  employed, 
or  watchmen  detailed  for  the  purpose.  All  outside  errands  should 
be  passed  through  the  chief  messenger,  who  can  often  arrange  that 
several  errands  shall  be  done  on  the  same  trip,  saving  both  time 
and  car  fare. 

The  night  watchmen,  who  are  left  in  entire  charge  of  the  building 
and  its  contents,  should  be  intelligent  and  active,  as  well  as  thoroughly 
trustworthy.  It  is  a  mistake  to  suppose  that  this  is  a  position  to  be 
filled  by  the  superannuated.  The  watchmen  inspect  the  building 
at  frequent  and  regular  intervals.  Except  in  case  of  emergency, 
they  should  never  admit  any  one  to  the  building  unless  authorized 


MISCELLANEOUS   SUBJECTS  259 

to  do  so  by  the  proper  officer.     Outside  electric  connections  are  now 
used  as  a  valuable  additional  protection. 

The  cleaners  are  sometimes  a  separate  force;  often  the  watch- 
men and  messengers  do  this  work.  Whatever  the  arrangement,  the 
cleaning  should  be  regularly  done  under  strict  supervision.  The 
best  results  are  obtained  by  having  a  housekeeper  or  superintendent 
of  the  building,  who  is  responsible  for  its  condition,  and  who  oversees 
the  work  of  scrubbing  and  cleaning.  The  standard  of  cleanliness 
in  offices  is  unfortunately  not  high,  and  in  many  that  abomination, 
the  feather  duster,  still  holds  sway.  A  lesson  in  the  art  of  conquering 
dirt  should  be  learned  from  the  hospitals. 

OFFICE  BUILDING 

Trust  companies  are  permitted  by  law  to  hold  sufficient  real 
estate  to  provide  for  the  conduct  of  their  business.  The  limit  of  such 
holdings  is  usually  fixed  by  charter  or  statutory  provision. 

Some  trust  companies  occupy  rented  quarters,  but  location  is  so 
important  a  factor  in  securing  and  holding  business  that  for  the  sake 
of  permanent  tenure  they  usually  own  their  office  buildings.  Where 
the  price  of  land  permits,  the  company  generally  prefers  to  occupy 
an  entire  building. 

The  construction  should  be  of  the  best,  and  the  first  cost  will  be 
more  than  offset  by  the  later  saving  in  repairs.  The  building  should 
be  fireproof  throughout,  the  walls  heavy  enough  to  protect  the  interior 
in  case  of  fire  in  adjoining  buildings.  If  surrounded  by  high  build- 
ings, the  roof  should  also  be  strong  enough  to  bear  the  weight  of 
walls  which  may  fall  upon  it.  Steel  cases  and  shelving  are  superior 
to  wood. 

The  main  banking  room  occupies  the  ground  floor.  There 
is  usually  a  lobby  just  inside  the  entrance  and  a  central  aisle  with 
the  offices  on  each  side.  The  banking  department  is  generally  near 
the  entrance,  while  the  trust  and  other  departments  are  in  the  rear 
or  on  different  floors.  The  higher  officers  should  be  protected  from 
the  importunities  of  the  pedler  and  book  agent,  and  yet  they  should 
be  within  reach  of  all  who  wish  to  consult  them. 

The  plans  for  a  new  building  should  provide  a  systematic  arrange- 
ment of  departments,  and  allow  space  for  future  growth.  In  each 


260  THE  MODERN   TRUST   COMPANY 

department  there  should  be  a  comfortable  room  for  the  officer  in 
charge,  and  ample  provision  for  the  convenience  of  customers.  In 
the  trust  department,  especially,  where  the  visits  of  clients  are  neces- 
sarily often  long,  there  should  be  pleasant  waiting  rooms,  and  rooms 
where  securities  may  be  received  and  counted,  or  conferences  held, 
with  due  regard  for  privacy.  Many  companies  are  now  providing 
separate  quarters  for  women  customers,  furnished  with  every  luxury, 
and  with  a  maid  in  attendance.  Adequate  lavatories  for  the  use 
of  both  the  office  force  and  the  public  are  essential.  Where  both 
men  and  women  are  employed,  separate  dressing  and  wash  rooms 
must  be  provided.  Each  employee  should  have  a  locker  for  his  personal 
use.  Clerks  should  not  be  permitted  to  leave  hats  or  clothing  where 
they  can  be  seen  by  the  customers.  Storerooms  for  old  books,  records, 
and  correspondence  should  be  so  arranged  that  all  documents  can 
be  readily  found  and  consulted  when  necessary.  If  meals  are  served 
to  the  employees,  the  dining  rooms,  pantry,  and  kitchen  should  be  at 
the  top  of  the  building  if  possible,  —  never  in  the  basement,  —  and 
so  ventilated  that  the  smell  of  cooking  cannot  penetrate  elsewhere. 
The  officer  in  charge  of  the  building  should  make  a  careful  study  of 
its  ventilation.  Fresh  air  is  essential  to  the  health  and  efficiency  of 
the  employees,  and  the  comfort  of  customers.  The  basement  should 
extend  under  the  entire  building,  and  where  space  is  precious,  it  can 
be  used  for  safe  deposit  vaults  as  well  as  for  lighting  and  heating 
plants,  lavatories,  and  stock  rooms. 

The  vaults  are  built  on  foundations  entirely  separate  from  the 
rest  of  the  building.  The  heavy  main  doors  are  equipped  with  time 
and  combination  locks.  Inside  these  are  grill  doors  for  use  during 
office  hours,  and  locked  steel  closets.  Electric  attachments  are 
often  used,  which  record  at  a  point  outside  the  building  the  time 
when  the  vault  doors  are  opened  and  closed. 

After  office  hours  all  persons  entering  or  leaving  the  building 
should  do  so  through  a  single  door,  and  the  watchman  on  duty  should 
keep  a  tally  sheet  of  their  names.  An  automatic  attachment  rings 
a  bell  and  records  the  time  while  the  door  is  open.  The  two  records 
should  be  compared  each  morning.  A  time  detector  should  be 
punched  at  regular  intervals  by  the  watchmen  who  make  frequent 
rounds  of  the  building.  The  right  to  enter  the  building  when 
closed  should  be  limited  to  as  small  a  number  as  possible. 


MISCELLANEOUS   SUBJECTS  26 1 

On  the  books  of  a  new  organization,  its  building  and  fixtures 
appear  at  cost  figures.  These  should  gradually  be  reduced  to  allow 
for  possible  depreciation  in  the  value  of  the  land  and  for  the  wear 
and  tear  of  building  and  fixtures.  In  every  mercantile  or  manufac- 
turing business,  a  fixed  amount  is  annually  written  off  for  the  depre- 
ciation of  the  plant,  and  the  same  principle  should  be  followed  by 
financial  institutions,  although  many  of  them  let  real  estate  and  build- 
ings stand  at  cost  on  the  books,  and  are  content  to  take  the  halfway 
measure  of  charging  repairs  and  renewals  to  income  expenses.  Even 
if  the  value  of  the  land  increases,  it  is  sound  policy  to  cut  down  the 
book  value  so  as  to  be  prepared  for  the  possible  removal,  extension, 
or  alteration  of  the  office  building. 

LUNCHEON   ROOM 

Where  the  size  of  the  company  and  the  profits  of  the  business 
warrant  the  expense,  it  is  advisable  to  give  the  employees  a  luncheon 
in  the  building.  The  only  argument  against  providing  meals  is  their 
cost,  and  this  may  be  defrayed  by  charging  for  them,  and  still  giving 
a  cheaper  and  better  luncheon  than  could  be  obtained  elsewhere.  The 
substitution  of  a  comfortable  meal  for  a  "  quick  lunch  "  of  dubious 
quality  has  its  effect  on  the  health  and  regular  attendance  of  the 
office  force.  It  also  insures  the  clerks  being  in  the  building  if  needed, 
obviates  the  danger  of  their  frequenting  undesirable  resorts,  and 
reduces  the  length  of  time  they  are  absent  from  their  desks. 

Sometimes  a  caterer  brings  the  meal  already  prepared  to  the 
office.  It  is  more  satisfactory  for  the  company  to  have  its  own  kitchen, 
storeroom,  and  pantry,  and  to  employ  a  housekeeper.  The  house- 
keeper should  prepare  the  weekly  menus  and  submit  them  for  ap- 
proval to  a  superior  officer.  There  may  be  somewhat  different 
bills  of  fare  for  the  messengers  and  watchmen,  the  general  force  of 
clerks,  and  the  officers.  Usually  there  is  a  special  dining  room  for 
the  president  and  directors.  In  some  companies  luncheon  is  served 
separately  to  the  women  employees. 

By  having  two  tables  at  which  meals  are  served  alternately  each 
half  hour,  the  office  force  can  be  provided  for  without  taking  many 
from  their  desks  at  the  same  time.  One  capable  cook  and  a  helper 
can  provide  luncheon  for  about  one  hundred  persons,  and  two  waiters 


262  THE   MODERN   TRUST  COMPANY 

can  serve  the  meals  to  the  same  number  in  relays  of  twelve  to  eigh- 
teen. Where  a  series  of  luncheons  is  served,  a  hotel  gas  range  should 
be  used.  The  cost  is  usually  about  the  same  as  for  coal,  and  a  quick 
and  even  fire  is  secured  with  entire  freedom  from  ashes.  There 
should  be  large  serving  and  steam  tables.  It  is  also  well  to  provide 
ample  refrigerators  and  storerooms  so  that  meats  and  provisions  can 
be  bought  in  quantity. 

If  a  housekeeper  is  employed,  she  should  be  responsible  for  the 
cleanliness  of  the  entire  building,  and  the  scrubbers  and  cleaners 
should  be  under  her  direction.  A  competent  housekeeper  who  is  a 
trained  dietician  with  a  good  knowledge  of  household  economics 
can  make  the  position  an  important  one.  A  housekeeping  depart- 
ment makes  it  possible  to  provide  luncheons  for  stockholders'  meet- 
ings and  other  special  occasions  at  comparatively  slight  cost. 

PURCHASE  AND   CARE  OF  SUPPLIES 

To  avoid  duplication  and  waste,  all  purchases  should  be  made 
under  the  direction  of  a  single  officer  especially  qualified  for  this 
duty.  Each  department  makes  requisition  on  the  purchasing  officer 
for  needed  supplies.  The  buyer  should,  if  possible,  not  be  the  dis- 
bursing officer.  An  absolute  rule  should  be  made  against  the  pur- 
chasing officer's  accepting  commissions  and  gifts,  no  matter  how 
trifling,  or  rebates  of  any  sort.  There  cannot  be  fair  competition 
unless  the  bidder  realizes  that  price  and  quality  are  the  only  factors 
to  be  considered. 

Carelessness  on  the  part  of  buyers  has  probably  fostered  the 
prevailing  opinion  that  the  large  profits  of  financial  institutions  make 
them  fair  game  for  the  merchant  as  well  as  the  tax  gatherer.  As  a 
matter  of  fact,  a  trust  company  should  be  able  to  buy  on  more  favor- 
able terms  than  the  ordinary  customer,  because  of  the  certainty  of 
prompt  payment  and  the  likelihood  of  continuous  custom.  Good 
policy  requires  that  the  purchases  of  a  trust  company  should  be  in 
keeping  with  its  reputation  for  solidity  and  success;  its  stationery 
should  be  attractive  for  the  same  reasons  that  its  building  should 
be  kept  in  good  repair.  The  most  expensive  supplies  are  not  always 
the  most  serviceable,  however,  and  the  expert  purchasing  officer  can 
effect  large  savings  by  knowing  where  and  how  to  buy  to  the  best 
advantage.  Thus,  certain  firms,  whose  prices  are  low  for  one  kind 


MISCELLANEOUS   SUBJECTS  263 

of  work,  may  invariably  be  high  for  others.  The  stationer  who  out- 
bids his  competitors  on  general  printing  may  not  be  able  to  compete 
on  the  item  of  envelopes  with  the  envelope  manufacturers  who  both 
make  and  print  the  goods. 

Wherever  possible,  purchases  should  be  made  in  quantity  and 
after  securing  competitive  bids.  Careful  specifications  should  always 
be  prepared,  both  to  protect  the  purchaser  and  to  make  it  certain 
that  the  bidders  are  all  estimating  on  the  same  thing.  Bids  should 
only  be  asked  from  reputable  and  responsible  firms.  When  long 
experience  has  proved  that  a  particular  firm  always  presents  the 
lowest  bid  in  its  line,  and  that  the  prices  vary  but  slightly  from  year 
to  year,  it  may  not  be  necessary  to  get  more  than  their  single  estimate 
unless  there  should  be  a  sudden  advance  in  price. 

All  stationery  and  books  in  regular  use  should  be  ordered  annually. 
When  expensive  forms  are  used  in  small  quantities,  considerable  saving 
can  be  effected  by  ordering  for  longer  periods.  If  the  order  for  the 
entire  year's  printing  is  given  in  the  late  spring  or  early  summer, 
when  the  printers'  business  is  dull,  and  full  time  is  allowed  for  de- 
livery, a  concession  in  price  can  usually  be  obtained.  Special  and 
rush  orders  are  always  costly. 

Before  the  annual  orders  for  stationery  and  supplies  are  given, 
the  stock  clerk  should  show  on  an  inventory  sheet  the  stock  on  hand, 
the  amounts  used  during  the  previous  year,  and  the  date,  quantity, 
and  prices  of  the  last  order.  Using  these  figures  as  a  basis,  estimates 
are  asked  for  the  amounts  needed  for  the  coming  year. 

In  a  trust  company  the  cost  of  supplies  is  charged  off  as  an  accrued 
expense  as  soon  as  the  bill  is  approved  as  correct.     Hence  the  in- 
ventory of  supplies  on  hand  does  not,  as  in  a  mercantile  or  manu- 
facturing business,   form  an  essential  part  of  the  balance  sheet. 
Careful  records  should  nevertheless  be  kept  in  order  to  prevent  waste. 

In  a  recently  organized  trust  company  in  a  small  country  town, 
the  bank  examiner  found  on  his  first  visit  an  item  of  "personal  prop- 
erty" in  the  general  balance  sheet.  Upon  inquiry  this  item  was  found 
to  represent  the  stock  of  pens,  pencils,  and  stationery  on  hand,  and 
the  examiner's  suggestion  that  the  item  be  charged  off  as  an  expense, 
brought  to  light  the  fact  that  the  earnings  were  not  sufficient  to  cover 
their  cost,  and  that  charging  them  off  would  result  in  an  impairment 
of  the  company's  capital ! 


THE  MODERN  TRUST  COMPANY 

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MISCELLANEOUS   SUBJECTS  265 

All  goods  should  be  delivered  to  the  stockkeeper,  who  examines 
them  and  notes  their  receipt  in  a  record  of  supplies  received.  He 
should  compare  the  goods  delivered  with  the  quantities  ordered, 
and  initial  the  bills  if  found  correct.  He  is  responsible  for  the  care 
of  all  supplies  and  should  be  given  ample  space  to  arrange  them 
systematically  and  neatly.  The  supplies  belonging  to  each  depart- 
ment should  be  kept  together  and  when  possible  arranged  according 
to  the  number  of  the  form.  They  may  be  kept  on  open  shelves  of 
varying  size,  in  cheap  pasteboard  boxes,  the  smaller  boxes  one-half, 
one-quarter,  and  one- eighth  the  size  of  the  larger  ones,  so  that  the 
different  sizes  can  be  stacked  together  without  wasting  space.  In 
ordering  large  quantities  of  stationery,  envelopes,  etc.,  it  is  well  to 
specify  that  the  goods  shall  be  delivered  either  in  boxes  or  else  wrapped 
in  sealed  packages,  and  clearly  marked  with  the  form  number  and 
amount. 

No  stock  should  be 'distributed  to  the  various  departments  except 
upon  requisition,  properly  signed.  A  stock  ledger  should  be  kept, 
showing  the  dates  and  quantities  received  and  delivered,  and  the 
balance  on  hand.  This  record  is  most  conveniently  kept  on  large 
cards  ruled  in  the  usual  ledger  form.  Postings  are  made  at  regu- 
lar intervals  from  the  record  of  stock  received  and  the  requisitions. 
By  keeping  track  of  the  balance  on  hand,  it  is  easy  to  know  just 
when  to  order  fresh  supplies.  As  the  stock  ledger  shows  the  quan- 
tities used  from  year  to  year,  it  is  also  a  simple  matter  to  estimate  the 
quantity  needed  for  any  given  period.  Without  such  a  record  it 
would  be  all  but  impossible  to  order  supplies  systematically.  The 
stock  ledger  can,  if  desired,  be  combined  with  the  index  of  forms 
described  below.  The  stockkeeper  should  take  stock  at  stated 
periods,  in  order  to  verify  his  records. 

Contracts  should  be  made  covering  the  cost  of  small  and  recur- 
ring items,  such  as  printing  depositors'  names  on  standard  checks, 
and  numbering  and  binding  checks.  Standard  qualities  of  paper 
and  a  uniform  style  of  printing  should  be  adhered  to.  All  forms 
should  be  numbered  and  bear  the  amount  and  date  of  the  order. 
Thus,  "T.2i.  5000  7.05"  would  designate  trust  department  form, 
No.  21,  for  which  the  order  was  given  in  July,  1905,  for  5000 
copies. 

Orders  should  invariably  be  given  on  a  printed  order  form,  and 


266  THE  MODERN   TRUST  COMPANY 

a  carbon  copy  or  stub  should  be  retained.  Copies  of  the  forms  used 
in  each  department  should  be  kept  in  a  sample  book,  arranged  ac- 
cording to  form  numbers.  This  should  be  supplemented  by  a  card 
index  of  forms  arranged  in  the  same  way  and  giving  the  date,  quantity, 
and  price  paid.  The  quantities  purchased  during  a  period  of  years 
and  their  cost  are  thus  recorded,  and  fluctuations  in  price  are  easily 
traced.  Following  the  cards  representing  numbered  forms  there 
should  be  an  alphabetical  index  of  other  equipment  in  regular  use. 

ADVERTISING 

The  well-pleased  client  is  undoubtedly  the  best  advertisement; 
but  in  these  days  of  fierce  competition  it  does  not  do  to  depend  alone 
on  the  good- will  of  friends  to  spread  a  knowledge  of  one's  business. 
The  better  the  commodity  or  service  one  has  to  offer,  the  more  impor- 
tant to  have  it  brought  to  the  notice  of  the  people  who  need  it. 

Advertising  has  become  an  art,  and  the  form  of  the  advertise- 
ment must  be  carefully  adapted  to  the  nature  of  the  business,  and 
the  temper  of  the  public  appealed  to.  The  merchant  may  be  justified 
in  crying  his  wares  in  a  fashion  entirely  inappropriate  for  the  trust 
company,  which  misses  the  whole  object  of  drawing  attention  to 
itself  unless  it  can  inspire  confidence  at  the  same  time.  The  old 
and  conservative  community,  especially,  must  not  have  its  ideas  of 
decorum  too  rudely  shaken. 

Most  trust  companies  advertise  regularly  in  daily  newspapers, 
and  occasionally  in  magazines.  They  also  distribute  statements 
of  condition,  leaflets,  pamphlets,  and  even  larger  books,  giving  a 
history  of  the  company  or  explaining  its  purposes.  There  is,  besides, 
a  mass  of  more  or  less  delusive  advertising,  delusive,  that  is,  from 
the  point  of  view  of  the  advertiser.  Blotters,  calendars,  rulers,  and 
the  thousand  and  one  gift  books  and  novelties  which  trust  companies 
are  continually  urged  to  use  as  advertising  matter  may  occasionally 
bring  in  business,  but  the  return  is  seldom  in  proportion  to  the  outlay. 

Mr.  John  E.  Powers,  the  author  of  much  successful  advertising, 
says :  "  The  limit  to  what  can  be  done  in  newspapers  is  one  little 
item  a  day,  one  simplest  possible  thought.  Divide  the  whole  knowl- 
edge into  its  smallest  parts,  and  present  one  part  a  day.  The  atten- 
tion of  people  to  such  things  is  no  more  than  enough,  if  indeed  it  be 


MISCELLANEOUS   SUBJECTS  267 

enough,  for  one  little  thought  a  day:  and  the  smaller  the  thought, 
the  more  likely  it  is  to  grow  in  the  reader's  mind." 

Money  given  at  the  instigation  of  powerful  friends  to  a  charity, 
a  city  bureau,  or  a  local  military  organization  should  be  charged 
to  profit  and  loss  rather  than  to  advertising.  Especially  to  be 
avoided  are  so-called  directories  and  gift  books  published  simply  to 
secure  advertisements,  and  the  alluring  volumes  in  which  a  his- 
tory of  the  company  or  biographical  sketches  of  its  officers  are  to 
be  inserted  without  charge.  The  large  supply  of  "marked  copies" 
which  has  to  be  bought  later,  or  the  bill  for  etching  a  second-rate 
portrait,  sets  a  price  on  this  concession  to  corporate  or  individual 
vanity. 

The  banker  is  proverbially  "easy"  in  these  matters.  He  has  not 
been  forced  to  give  the  same  close  attention  to  advertising  as  the 
merchant,  and  he  seldom  has  an  expert  advertising  manager.  The 
need  of  system  is,  however,  gradually  being  recognized.  A  trust 
company's  advertising  should  all  be  in  charge  of  one  person,  and  the 
sum  to  be  expended  for  the  year,  as  well  as  the  general  plan  of  cam- 
paign, should  be  settled  and  contracts  made  in  advance.  If  there 
is  no  one  in  the  office  force  fitted  to  map  out  the  work  successfully, 
an  advertising  agency  of  high  grade  may  be  employed  to  take  charge 
of  all  the  advertising,  or  to  act  in  an  advisory  capacity.  In  the 
selection  of  an  expert  great  care  should  be  taken,  for  the  man  who 
can  successfully  advertise  a  soap  or  a  piano,  may  not  understand  the 
difference  between  a  grocery  store  and  a  trust  company.  On  the 
other  hand,  a  plan  should  not  be  condemned  simply  on  the  ground 
of  novelty,  and  the  agent  once  chosen  should  so  far  as  possible  be 
given  an  opportunity  to  carry  out  his  ideas. 


APPENDIX 

TRUST  COMPANIES  IN  THE  DISTRICT  OF 
COLUMBIA 

CHAPTER   1246,  STATUTES  AT  LARGE,   1890 

AN    ACT    TO    PROVIDE     FOR    THE    INCORPORATION    OF    TRUST,    LOAN,    MORTGAGE,    AND 
CERTAIN   OTHER  CORPORATIONS  WITHIN  THE  DISTRICT  OF  COLUMBIA 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America  in  Congress  assembled,  That  corporations  may  be  formed 
within  the  District  of  Columbia  for  the  purpose  hereinafter  mentioned  in 
the  following  manner :  — 

Any  time  hereafter  any  number  of  natural  persons,  citizens  of  the 
United  States,  not  less  than  twenty-five,  may  associate  themselves  for 
the  purpose  of  carrying  on  in  the  District  of  Columbia  any  one  of  the 
three  classes  specified,  to  wit :  — 

FIRST  :   A  safe  deposit,  trust,  loan,  and  mortgage  business. 

SECOND  :   A  title  insurance,  loan,  and  mortgage  business. 

THIRD  :  A  security,  guaranty,  indemnity,  loan,  and  mortgage  busi- 
ness :  PROVIDED,  That  the  capital  stock  of  any  of  said  companies  shall 
not  be  less  than  one  million  of  dollars :  PROVIDED  FURTHER,  That  any 
of  said  companies  may  also  do  a  storage  business  when  their  capital  stock 
amounts  to  the  sum  of  not  less  than  one  million  two  hundred  thousand 
dollars. 

Organization  Certificate  of  Company,  Sec.  2. — That  such  persons  shall, 
under  their  hands  and  seals,  execute,  before  some  officer  in  said  district 
competent  to  take  the  acknowledgment  of  deeds,  an  organization  certifi- 
cate, which  shall  specifically  state :  — 

FIRST  :   The  name  of  the  corporation. 

SECOND  :  The  purposes  for  which  it  is  formed. 

THIRD  :  The  term  for  which  it  is  to  exist,  which  shall  not  exceed 
the  term  of  fifty  years,  and  be  subject  to  alteration,  amendment,  or 
repeal  by  Congress  at  any  time. 

FOURTH  :  The  number  of  its  directors,  and  the  names  and  resi- 
dences of  the  officers  who  for  the  first  year  are  to  manage  the  affairs  of 
the  company. 

269 


APPENDIX 

FIFTH  :  The  amount  of  the  capital  stock  and  its  subdivision  into 
shares. 

Charter  obtained  from  District  Commissioners,  Sec.  3.  —  That  this 
certificate  shall  be  presented  to  the  Commissioners  of  the  District,  who 
shall  have  power  and  discretion  to  grant  or  to  refuse  to  said  persons 
a  charter  of  incorporation  upon  the  terms  set  forth  in  the  said  certificate 
and  the  provisions  of  this  act. 

Notice  of  Intention  to  apply  for  Charter,  Sec.  4.  —  That  previous 
to  the  presentation  of  the  said  certificate  to  the  said  commissioners, 
notice  of  the  intention  to  apply  for  such  charter  shall  be  inserted  in 
two  newspapers  of  general  circulation  printed  in  the  District  of  Columbia 
at  least  four  times  a  week  for  three  weeks,  setting  forth  briefly  the  name 
of  the  proposed  company,  its  character  and  object,  the  names  of  the  pro- 
posed corporators,  and  the  intention  to  make  application  for  a  charter  on 
a  specified  day,  and  the  proof  of  such  publication  shall  be  presented  with 
said  certificate  when  presentation  thereof  is  made  to  said  Commissioners. 

Charter  filed  with  Recorder  of  Deeds  for  the  District,  Sec.  5.— That 
if  the  charter  be  granted  as  aforesaid  it,  together  with  the  certificate 
of  the  Commissioners  granting  the  same  indorsed  thereon,  shall  be  filed 
for  record  in  the  office  of  the  recorder  of  deeds  for  the  District  of 
Columbia,  and  shall  be  recorded  by  him.  On  the  filing  of  the  said  cer- 
tificate with  the  said  recorder  of  deeds  as  herein  provided,  approved  as 
aforesaid  by  the  said  Commissioners,  the  persons  named  therein  and  their 
successors  shall  thereupon  and  thereby  be  and  become  a  body  corporate 
and  politic,  and  as  such  shall  be  vested  with  all  the  powers  and  charged 
with  all  the  liabilities  conferred  upon  and  imposed  by  this  act  upon 
companies  organized  under  the  provisions  hereof :  PROVIDED,  HOWEVER, 
That  no  corporation  created  and  organized  under  the  provisions  hereof, 
or  availing  itself  of  the  provisions  hereof  as  provided  in  section  eleven, 
shall  be  authorized  to  transact  the  business  of  a  trust  company,  or  any 
business  of  a  fiduciary  character,  until  it  shall  have  filed  with  the  Comp- 
troller of  the  Currency  a  copy  of  its  certificate  of  organization  and  charter 
and  shall  have  obtained  from  him  and  filed  the  same  for  record  with  the 
said  recorder  of  deeds  a  certificate  that  the  capital  stock  of  said  company 
has  been  paid  in  and  the  deposit  of  securities  made  with  said  Comptroller 
in  the  manner  and  to  the  extent  required  by  this  act. 

Trust  Companies  under  Comptroller's  Supervision,  Sec.  6.  —  That  all 
companies  organized  hereunder,  or  which  shall  under  the  provisions 
hereof  become  entitled  to  transact  the  business  of  a  trust  company,  shall 
report  to  the  Comptroller  of  the  Currency  in  the  manner  prescribed  by 
sections  fifty-two  hundred  and  eleven,  fifty-two  hundred  and  twelve,  and 
fifty-two  hundred  and  thirteen,  Revised  Statutes  of  the  United  States, 


APPENDIX  271 

in  the  case  of  national  banks,  and  all  acts  amendatory  thereof  or  supple- 
mentary thereto,  and  with  similar  provisions  for  compensating  examiners, 
and  shall  be  subject  to  like  penalties  for  failure  to  do  so.  The  Comptroller 
shall  have  and  exercise  the  same  visitorial  powers  over  the  affairs  of  the 
said  corporation  as  is  conferred  upon  him  by  section  fifty-two  hundred  and 
forty  of  the  Revised  Statutes  of  the  United  States  in  the  case  of  national 
banks.  He  shall  also  have  power,  when  in  his  opinion  it  is  necessary, 
to  take  possession  of  any  such  company  for  the  reasons  and  in  the  manner 
and  to  the  same  extent  as  are  provided  in  the  laws  of  the  United  States 
with  respect  to  national  banks. 

Powers  of  these  Companies,  Sec.  7.  —  That  all  companies  organized 
under  this  act  are  hereby  declared  to  be  corporations  possessed  of  the 
powers  and  functions  of  corporations  generally,  and  shall  have  power :  — 

FIRST  :  To  make  contracts. 

SECOND:  To  sue  and  be  sued,  implead  and  be  impleaded,  in  any 
court  as  fully  as  natural  persons. 

THIRD  :  To  make  and  use  a  common  seal  and  alter  the  same  at 
pleasure. 

FOURTH  :  To  loan  money. 

FIFTH:  When  organized  under  subdivision  one  of  the  first  section 
of  this  act  to  accept  and  execute  trusts  of  any  and  every  description 
which  may  be  committed  or  transferred  to  them,  and  to  accept  the 
office  and  perform  the  duties  of  a  receiver,  assignee,  executor,  admin- 
istrator, guardian  of  the  estates  of  minors,  with  the  consent  of  the 
guardian  of  the  person  of  such  minor,  and  committee  of  the  estates 
of  lunatics  and  idiots  whenever  any  trusteeship  or  any  such  office  or 
appointment  is  committed  or  transferred  to  them,  with  their  consent,  by 
any  person,  body  politic  or  corporate,  or  by  any  court  in  the  District  of 
Columbia,  and  all  such  companies  organized  under  the  first  subdivision 
of  section  one  of  this  act  are  further  authorized  to  accept  deposits  of 
money  for  the  purposes  designated  herein  upon  such  terms  as  may  be 
agreed  upon  from  time  to  time  with  depositors,  and  to  act  as  agent  for 
the  purpose  of  issuing  or  countersigning  the  bonds  or  obligations  of  any 
corporation,  association,  municipality,  or  State,  or  other  public  authority, 
and  to  receive  and  manage  any  sinking  fund  on  any  such  terms  as  may 
be  agreed  upon,  and  shall  have  power  to  issue  its  debenture  bonds  upon 
deeds  of  trust  or  mortgages  of  real  estate  to  a  sum  not  exceeding  the  face 
value  of  said  deeds  of  trust  or  mortgages,  and  which  shall  not  exceed 
fifty  per  centum  of  the  fair  cash  value  of  the  real  estate  covered  by  said 
deeds  or  mortgages,  to  be  ascertained  by  the  Comptroller  of  the  Currency. 
But  no  debenture  bonds  shall  be  issued  until  the  securities  on  which  the 
same  are  based  have  been  placed  in  the  actual  possession  of  the  trustee 


APPENDIX 

named  in  the  debenture  bonds,  who  shall  hold  said  securities  until  all  of 
said  bonds  are  paid ;  and  when  organized  under  the  second  subdivision 
of  the  first  section  of  this  act  said  company  is  authorized  to  insure  titles 
to  real  estate  and  to  transact  generally  the  business  mentioned  in  said 
subdivision ;  and  when  organized  under  the  third  subdivision  of  section 
one  of  this  act  said  company  is  hereby  authorized,  in  addition  to  the  loan 
and  mortgage  business  therein  mentioned,  to  secure,  guaranty,  and  insure 
individuals,  bodies  politic,  associations,  and  corporations  against  loss  by 
or  through  trustees,  agents,  servants,  or  employees  and  to  guaranty  the 
faithful  performance  of  contracts  and  of  obligations  of  whatever  kind 
entered  into  by  or  on  the  part  of  any  person  or  persons,  association,  cor- 
poration or  corporations,  and  against  loss  of  every  kind:  PROVIDED, 
That  any  corporation  formed  under  the  provisions  of  this  act  when  acting 
as  trustee  shall  be  liable  to  account  for  the  amounts  actually  earned  by 
the  moneys  held  by  it  in  trust  in  addition  to  the  principal  so  held ;  but 
such  corporation  may  be  allowed  a  reasonable  compensation  for  services 
performed  in  the  care  of  the  trust  estate. 

Competent  to  Act  as  Trustee,  etc.,  Sec.  8.  —  That  in  all  cases  in 
which  application  shall  be  made  to  any  court  in  the  District  of  Columbia, 
or  wherever  it  becomes  necessary  or  proper  for  said  court  to  appoint  a 
trustee,  receiver,  administrator,  guardian  of  the  estate  of  a  minor,  or 
committee  of  the  estate  of  a  lunatic,  it  shall  and  may  be  lawful  for  said 
court  (but  without  prejudice  to  any  preference  in  the  order  of  any  such 
appointments  required  by  existing  law)  to  appoint  any  such  company 
organized  under  the  first  subdivision  of  section  one  of  this  act,  with  its 
assent,  such  trustee,  receiver,  administrator,  committee,  or  guardian,  with 
the  consent  of  the  guardian  of  the  person  of  such  minor:  PROVIDED, 
HOWEVER,  That  no  court  or  judge  who  is  an  owner  of  or  in  any  manner 
financially  interested  in  the  stock  or  business  of  such  corporation  shall 
commit  by  order  or  decree  to  any  such  corporation  any  trust  or  fiduciary 
duty. 

Qualifications  of  such  Trustee,  etc.,  Sec.  9.  —  That  whenever  any 
corporation  operating  under  this  act  shall  be  appointed  such  trustee, 
executor,  administrator,  receiver,  assignee,  guardian,  or  committee  as 
aforesaid,  the  president,  vice-president,  secretary,  or  treasurer  of  said 
company  shall  take  the  oath  or  affirmation  now  required  by  law  to  be 
made  by  any  trustee,  executor,  receiver,  assignee,  guardian,  or  committee. 

Security  for  Faithful  Performance  of  Trust,  Sec.  10.  —  That  when 
any  court  shall  appoint  the  said  company  a  trustee,  receiver,  admin- 
istrator, or  such  guardian,  or  committee,  or  shall  order  the  deposit  of 
money  or  other  valuables  with  said  company,  or  where  any  individual  or 
corporation  shall  appoint  any  of  said  companies  a  trustee,  executor, 


APPENDIX  273 

assignee,  or  such  guardian,  the  capital  stock  of  said  company  subscribed 
for  or  taken,  and  all  property  owned  by  said  company,  together  with  the 
liability  of  the  stockholders  and  officers  as  herein  provided,  shall  be 
taken  and  considered  as  the  security  required  by  law  for  the  faithful 
performance  of  its  duties,  and  shall  be  absolutely  liable  in  case  of  any 
default  whatever. 

Privileges  extended  to  Existing  Corporations,  Sec.  n.  —  That  any 
safe  deposit  company,  trust  company,  surety  or  guaranty  company, 
or  title-insurance  company  now  incorporated  and  operating  under  the 
laws  of  the  United  States  or  of  the  District  of  Columbia,  or  any  of 
the  States,  and  now  doing  business  in  said  District,  may  avail  itself  of 
the  provisions  of  this  act  on  filing  in  the  office  of  the  recorder  of  deeds 
of  the  District  of  Columbia,  or  with  the  Comptroller  of  the  Currency,  a 
certificate  of  its  intention  to  do  so,  which  certificate  shall  specify  which 
one  of  the  three  classes  of  business  set  out  in  section  one  it  will  carry 
on,  and  shall  be  verified  by  the  oath  of  its  president  to  the  effect  that 
it  has  in  every  respect  complied  with  the  requirements  of  existing  law, 
especially  with  the  provisions  of  this  act ;  that  its  capital  stock  is  paid 
in  as  provided  in  section  twenty-one  of  this  act  and  is  not  impaired,  and 
thereafter  such  company  may  exercise  all  powers  and  perform  all  duties 
authorized  by  any  one  of  the  subdivisions  of  section  one  of  this  act  in 
addition  to  the  powers  now  lawfully  exercised  by  such  company. 

Real  Estate,  Sec.  12.  —  That  any  company  operating  under  this  act 
may  lease,  purchase,  hold  and  convey  real  estate,  not  exceeding  in  value 
five  hundred  thousand  dollars,  and  such  in  addition  as  it  may  acquire 
in  satisfaction  of  debts  due  the  corporation,  under  sales,  decrees,  judg- 
ments, and  mortgages.  But  no  such  association  shall  hold  the  posses- 
sion of  any  real  estate  under  foreclosure  of  mortgage,  or  the  title  and 
possession  of  any  real  estate  purchased  to  secure  any  debts  due  to  it,  for 
a  longer  period  than  five  years. 

Period  of  Corporations'  Existence,  Sec.  13.  —  That  the  charters  for 
incorporations  named  in  this  act  may  be  made  perpetual,  or  may  be  lim- 
ited in  time  by  their  provisions,  subject  to  the  approval  of  Congress. 

Provisions  relating  to  Capital  Stock,  Sec.  14.  —  That  the  capital 
stock  of  every  such  company  shall  be  at  least  one  million  dollars,  and 
at  least  fifty  per  centum  thereof  must  have  been  paid  in,  in  cash  or  by 
the  transfer  of  assets  as  hereinafter  provided  in  section  twenty-one  of 
this  act,  before  any  such  company  shall  be  entitled  to  transact  business 
as  a  corporation,  except  with  its  own  members,  and  before  any  company 
organized  hereunder  shall  be  entitled  to  transact  the  business  of  a  trust 
company,  or  to  become  and  act  as  an  administrator,  executor,  guardian 
of  the  estate  of  a  minor,  or  undertake  any  other  kindred  fiduciary  duty, 
T 


2/4  APPENDIX 

it  shall  deposit,  either  in  money  or  in  bonds,  mortgages,  deed  of  trust,  or 
other  securities  equal  in  actual  value  to  one-fourth  of  the  capital  stock 
paid  in,  with  the  Comptroller  of  the  Currency,  to  be  kept  by  him  upon 
the  trust  and  for  the  purposes  hereinafter  provided  ;  and  the  said  Comp- 
troller may  from  time  to  time  require  an  additional  deposit  from  any 
such  company,  to  be  held  upon  and  for  the  same  trust  and  purposes,  not 
exceeding,  however,  in  value  one-half  the  paid-in  capital  stock ;  and  the 
said  Comptroller  shall  not  issue  to  any  corporation  the  certificate  hereto- 
fore provided  for  until  said  deposit  with  him  of  securities  required  by 
this  section.  Within  one  year  after  the  organization  of  any  corporation 
under  the  provisions  of  this  act,  or  after  any  corporation  heretofore  exist- 
ing shall  have  availed  itself  of  the  powers  and  rights  given  by  this  act 
in  the  manner  herein  provided  for,  its  entire  capital  stock  shall  have 
been  paid  in. 

Enforcement  of  Subscriptions  to  Stock,  Sec.  15.  —  That  the  capital 
stock  of  every  such  company  shall  be  divided  into  shares  of  one  hun- 
dred dollars  each.  It  shall  be  lawful  for  such  company  to  call  for 
and  demand  from  the  stockholders,  respectively,  all  sums  of  money  by 
them  subscribed,  at  such  time  and  in  such  proportions  as  its  board  of 
directors  shall  deem  proper,  within  the  time  specified  in  section  fourteen, 
and  it  may  enforce  payment  by  all  remedies  provided  by  law ;  and  if  any 
stockholder  shall  refuse  or  neglect  to  pay  any  instalment  as  required  by 
a  resolution  of  the  board  of  directors,  after  thirty  days'  notice  of  the 
same,  the  said  board  of  directors  may  sell  at  public  auction,  to  the  high- 
est bidder,  so  many  shares  of  said  stock  as  shall  pay  said  instalment, 
under  such  general  regulation  as  may  be  adopted  in  the  by-laws  of  said 
company,  and  the  highest  bidder  shall  be  taken  to  be  the  person 
who  offers  to  purchase  the  least  number  of  shares  for  the  assessment 
due. 

Annual  Report  to  Comptroller,  Sec.  16. — That  every  such  company 
shall  annually,  within  twenty  days  after  the  first  of  January  of  each 
year,  make  a  report  to  the  Comptroller  of  the  Currency,  which  shall 
be  published  in  a  newspaper  in  the  District,  which  shall  state  the 
amount  of  capital  and  of  the  proportion  actually  paid,  the  amount  of 
debts,  and  the  gross  earnings  for  the  year  ending  December  thirty-first 
then  next  previous,  together  with  their  expenses,  which  report  shall  be 
signed  by  the  president  and  a  majority  of  the  directors  or  trustees,  and 
shall  be  verified  by  the  oath  of  the  president,  secretary,  and  at  least 
three  of  the  directors  or  trustees.  And  said  company  shall  pay  to  the 
District  of  Columbia,  in  lieu  of  personal  taxes  for  each  next  ensuing 
year,  one  and  a  half  per  centum  of  its  gross  earnings  for  the  preceding 
year,  shown  by  said  verified  statement,  which  amount  shall  be  payable 


APPENDIX  275 

to  the  collector  of  taxes  at  the  times  and  in  the  manner  that  other  taxes 
are  payable. 

Liability  for  Failure  to  Report,  Sec.  17.  —  That  if  any  company 
fails  to  comply  with  the  provisions  of  the  preceding  section,  all  the 
directors  or  trustees  of  such  company  shall  be  jointly  and  severally 
liable  for  the  debts  of  the  company  then  existing,  and  for  all  that  shall 
be  contracted  before  such  report  shall  be  made :  PROVIDED,  That  in  case 
of  failure  of  the  company  in  any  year  to  comply  with  the  provisions  of 
section  sixteen  of  this  act,  and  any  of  the  directors  shall,  on  or 
before  January  fifteenth  of  such  year,  file  his  written  request  for  such 
compliance  with  the  secretary  of  the  company,  the  Comptroller  of  the 
Currency,  and  the  recorder  of  deeds  of  the  District  of  Columbia,  such 
director  shall  be  exempt  from  the  liability  prescribed  in  this  section. 

Perjury  and  Larceny,  Sec.  18.  —  That  any  wilful  false  swearing  in 
regard  to  any  certificate  or  report  or  public  notice  required  by  the 
provisions  of  this  act  shall  be  perjury,  and  shall  be  punished  as  such 
according  to  the  laws  of  the  District  of  Columbia.  And  any  misappro- 
priation of  any  of  the  money  of  any  corporation  or  company  formed 
under  this  act,  or  any  money,  funds,  or  property  intrusted  to  it,  shall  be 
held  to  be  larceny,  and  shall  be  punished  as  such  under  the  laws  of  said 
District. 

Transfer  of  Stock,  Sec.  19.  —  That  the  stock  of  such  company  shall 
be  deemed  personal  estate,  and  shall  be  transferable  only  on  the 
books  of  such  company  in  such  manner  as  shall  be  prescribed  by  the 
by-laws  of  the  company;  but  no  shares  shall  be  transferable  until  all 
previous  calls  thereon  shall  have  been  fully  paid,  and  the  said  stock 
shall  not  be  taxable,  in  the  hands  of  individual  owners,  the  tax  on  the 
capital  stock,  gross  earnings  of  the  company  hereinbefore  provided  being 
in  lieu  of  other  personal  tax.  All  certificates  of  the  stock  of  any  com- 
pany organized  under  this  act  shall  show  upon  their  face  the  par  value  of 
each  share  and  the  amount  paid  thereon. 

Liability  of  Stockholders,  Sec.  20. —  That  all  stockholders  of  every 
company  incorporated  under  this  act,  or  availing  itself  of  its  provi- 
sions under  section  eleven,  shall  be  severally  and  individually  liable  to 
the  creditors  of  such  company  to  an  amount  equal  to  and  in  addition  to 
the  amount  of  stock  held  by  them,  respectively,  for  all  debts  and 
contracts  made  by  such  company. 

Money  Payment  of  Capital  Stock  Required,  Sec.  21.  —  That  nothing 
but  money  shall  be  considered  as  payment  of  any  part  of  the  capital 
stock,  except  that  in  the  case  of  any  company  now  doing  business  in  the 
District  of  Columbia  in  any  of  the  classes  herein  provided  for,  or  under 
any  act  of  Congress  or  by  virtue  of  the  laws  of  any  of  the  States,  and 


276  APPENDIX 

which  company  has  actually  received  full  payment  in  money  of  at  least 
fifty  per  centum  of  the  capital  stock  required  by  this  act  and  which  com- 
pany desires  to  obtain  a  charter  under  this  act,  all  the  assets  or  property 
may  be  received  and  considered  as  money,  at  a  value  to  be  appraised 
and  fixed  by  the  Comptroller  of  the  Currency  :  PROVIDED,  That  all  such 
assets  and  property  are  also  transferred  to  and  are  thereafter  owned  by 
the  company  organized  under  this  act. 

Number  and  Election  of  Directors,  Sec.  22. —  That  the  stock,  property, 
and  concerns  of  such  company  shall  be  managed  by  not  less  than  nine 
nor  more  than  thirty  directors  or  trustees,  who  shall,  respectively,  be 
stockholders  and  at  least  one-half  residents  and  citizens  of  the  District 
of  Columbia,  and  shall,  except  the  first  year,  be  annually  elected  by  the 
stockholders  at  such  time  and  place  and  after  such  published  notice  as 
shall  be  determined  by  the  by-laws  of  the  company,  and  said  directors  or 
trustees  shall  hold  until  their  successors  are  elected  and  qualified. 

Officers,  Sec.  23. —  That  there  shall  be  a  president  of  the  company,  who 
shall  be  a  director,  also  a  secretary  and  a  treasurer,  all  of  whom  shall  be 
chosen  by  the  directors  or  trustees:  PROVIDED,  That  only  one  of  the 
above-named  offices  shall  be  held  by  the  same  person  at  the  same  time. 
Subordinate  officers  may  be  appointed  by  the  directors  or  trustees,  and 
all  such  officers  may  be  required  to  give  such  security  for  the  faithful 
performance  of  the  duties  of  their  office  as  the  directors  or  trustees  may 
require. 

By-Laws,  Sec.  24. —  That  the  directors  or  trustees  shall  have  power 
to  make  such  by-laws  as  they  deem  proper  for  the  management  or  disposal 
of  the  stock  and  business  affairs  of  such  company,  not  inconsistent  with 
the  provisions  of  this  act,  and  prescribing  the  duties  of  officers  and  ser- 
vants that  may  be  employed,  for  the  appointment  of  all  officers,  and  for 
carrying  on  all  kinds  of  business  within  the  objects  and  purposes  of  such 
company. 

Directors  Liable  for  Payment  of  Unearned  Dividends,  Sec.  25.  —  That 
if  the  directors  or  trustees  of  any  company  shall  declare  or  pay  any  i 
dividend,  the  payment  of  which  would  render  it  insolvent,  or  which 
would  create  a  debt  against  such  company,  they  shall  be  jointly  and 
severally  liable  as  guarantors  for  all  of  the  debts  of  the  company  then 
existing,  and  for  all  that  shall  be  thereafter  contracted,  while  they  shall, 
respectively,  remain  in  office. 

Directors'  Liability  may  be  Avoided,  Sec.  26.  —  That  if  any  of  the 
directors  or  trustees  shall  object  to  declaring  such  dividend  or  the  pay- 
ment of  the  same,  and  shall  at  any  time  before  the  time  fixed  for  the 
payment  thereof  file  a  certificate  of  their  objection  in  writing  with 
the  secretary  of  the  company  and  with  the  recorder  of  deeds  of  the 


APPENDIX  277 

District  they  shall  be  exempt  from  liability  prescribed  in  the  preceding 
section. 

Responsibility  of  Directors  for  Excess  Liabilities,  Sec.  27. —  That  if  the 
liabilities  of  any  company  shall  at  any  time  exceed  the  amount  of  the 
fair  cash  value  of  the  assets,  the  directors  or  trustees  of  such  company 
assenting  thereto  shall  be  personally  and  individually  liable  for  such 
excess  to  the  creditors  of  the  company  after  the  additional  liability  of  the 
stockholders  has  been  enforced. 

Trustee,  etc.,  not  Liable  on  Stock  Assessment,  Sec.  28.  —  That  no  per- 
son holding  stock  in  such  company  as  executor,  administrator,  guardian, 
or  trustee  shall  be  personally  subject  to  any  liability  as  stockholder  of 
such  company,  but  the  estate  and  funds  in  the  hands  of  such  executor, 
administrator,  guardian,  or  trustee,  shall  be  liable  in  like  manner  and  to 
the  same  extent  as  the  testator  or  intestate  or  the  ward  or  the  person  in- 
terested in  such  trust  would  have  been  if  he  had  been  living  and  com- 
petent to  act  and  hold  the  stock  in  his  own  name. 

Increase  of  Capital,  Sec.  29.  —  That  any  corporation  which  may  be 
formed  under  this  chapter  may  increase  its  capital  stock  by  complying 
with  the  provisions  of  this  chapter  to  any  amount  which  may  be  deemed 
sufficient  and  proper  for  the  purposes  of  the  corporation. 

Certified  Copy  of  Incorporation  Certificate  Competent  Evidence,  Sec.  30. 

—  That  a  copy  of  any  certificate  of  incorporation  filed  in  pursuance  of 
this  chapter,  certified  by  the  recorder  of  deeds  to  be  a  true  copy  and 
the  whole  of  such  certificate,  shall  be  received  in  all  courts  and  places  as 
presumptive  legal  evidence  of  the  facts  therein  stated. 

No  Bond  or  Other  Security  required  of  Trust  Companies,  Sec.  31. — 
That  no  bond  or  other  collateral  security,  except  as  hereinafter  stated, 
shall  be  required  from  any  trust  company  incorporated  under  this  act  for 
or  in  respect  to  any  trust,  nor  when  appointed  trustee,  guardian,  receiver, 
executor,  or  administrator,  with  or  without  the  will  annexed,  committee 
of  the  estate  of  a  lunatic  or  idiot,  or  other  fiduciary  appointment ;  but  the 
capital  stock  subscribed  for  or  taken,  and  all  property  owned  by  said 
company  and  the  amount  for  which  said  stockholders  shall  be  liable  in 
excess  of  their  stock,  shall  be  taken  and  considered  as  the  security 
required  by  law  for  the  faithful  performance  of  its  duties  and  shall  be 
absolutely  liable  in  case  of  any  default  whatever;  and  in  case  of  the 
insolvency  or  dissolution  of  said  company  the  debts  due  from  the  said 
company  as  trustee,  guardian,  receiver,  executor,  or  administrator,  com- 
mittee of  the  estate  of  lunatics,  idiots,  or  any  other  fiduciary  appointment, 
shall  have  a  preference. 

District  Supreme  Court  has  Jurisdiction  of  Trust  Companies,  Sec.  32. 

—  That  the  supreme  court  of  the  District  of  Columbia,  or  any  justice 


278  APPENDIX 

thereof,  shall  have  power  to  make  orders  respecting  such  company  when- 
ever it  shall  have  been  appointed  trustee,  guardian,  receiver,  executor,  or 
administrator,  with  or  without  the  will  annexed,  committee  of  the  estate 
of  a  lunatic,  idiot,  or  any  other  fiduciary,  and  require  the  said  company 
to  render  all  accounts  which  might  lawfully  be  made  or  required  by  any 
court  or  any  justice  thereof  if  such  trustee,  guardian,  receiver,  executor, 
administrator,  with  or  without  the  will  annexed,  committee  of  the  estate 
of  a  lunatic  or  idiot,  or  fiduciary  were  a  natural  person.  And  said  court 
or  any  justice  thereof,  at  any  time,  on  application  of  any  person  inter- 
ested, may  appoint  some  suitable  person  to  examine  into  the  affairs  and 
standing  of  such  companies,  who  shall  make  a  full  report  thereof  to  the 
court,  and  said  court,  or  any  justice  thereof,  may  at  any  time,  in  its  dis- 
cretion, require  of  said  company  a  bond  with  sureties  or  other  securities 
for  the  faithful  performance  of  its  obligations,  and  such  sureties  or  other 
security  shall  be  liable  to  the  same  extent  and  in  the  same  manner  as  if 
given  or  pledged  by  a  natural  person. 

All  Similar  District  Corporations  Subject  to  this  Act,  Sec.  33.— 
That  no  corporation  or  company  organized  by  virtue  of  the  laws  of  any 
of  the  States  of  this  Union  and  having  its  principal  place  of  business 
within  the  District  of  Columbia,  shall  carry  on,  in  the  District  of  Colum- 
bia, any  of  the  kinds  of  business  named  in  this  act  without  strict  com- 
pliance in  all  particulars  with  the  provisions  of  this  act  for  the  government 
of  such  corporations  formed  under  it,  and  each  one  of  the  officers  of  the 
corporation  or  company  so  offending  shall  be  punished  by  fine  not  exceed- 
ing one  thousand  dollars,  or  imprisonment  in  some  state's  prison  not 
exceeding  one  year,  or  by  both  fine  and  imprisonment,  in  the  discretion 
of  the  court.  This  section  shall  not  take  effect  till  six  months  after  the 
approval  of  this  act. 

Provisions  for  Amendment,  Sec.  34.  —  That  Congress  may  at  any 
time  alter,  amend,  or  repeal  this  act,  but  any  such  amendment  or 
repeal  shall  not,  nor  shall  the  dissolution  of  any  company  formed  under 
this  act,  take  away  or  impair  any  remedy  given  against  such  corporation, 
its  stockholders  or  officers,  for  any  liability  or  penalty  which  shall  have 
been  previously  incurred :  PROVIDED,  That  the  courts  of  the  District  of 
Columbia  shall  not  have  power  to  appoint  any  trustee,  trustees,  guardians, 
receivers,  or  other  trustee  of  a  fund  or  property  located  outside  of  the 
District  of  Columbia,  or  belonging  to  a  corporation  or  person  having  a 
legal  residence  or  location  outside  of  said  District. 

Approved  October  ist,  1890. 


APPENDIX  279 

NEW  YORK   STOCK   EXCHANGE 

REQUIREMENTS  FROM  APPLICANTS  FOR  LISTING  STOCKS  OR  BONDS 

An  application  signed  by  an  executive  officer  of  a  Corporation  must  be 
filed  with  the  Secretary  of  the  Exchange,  and  on  notice  from  him  six 
additional  printed  or  typewritten  copies  must  be  filed  on  or  before  the 
Wednesday  prior  to  date  set  for  its  consideration. 

Every  application  must  be  accompanied  by  a  check  for  Fifty  Dollars  for 
each  $1,000,000,  or  portion  thereof,  of  the  par  value  of  each  class  of  security. 
Check  should  be  drawn  to  the  order  of  "  Treasurer  of  the  New  York  Stock 
Exchange,"  and  will  immediately  become  the  property  of  the  Exchange. 

Requirements  for  Original  Listings 
Railroad  Corporations 

Application  for  an  original  listing  of  the  securities  of  a  Railroad  Com- 
pany shall  recite  the  title  of  the  Company,  date  of  organization  and 
authority  for  same ;  amount  of  authorized  Capital  Stock  and  amount 
issued,  par  value,  rate  of  dividend ;  voting  power ;  if  full  or  partially  paid ; 
if  personal  liability  attaches  to  ownership ;  if  Preferred  Stock  is  authorized 
whether  cumulative  or  non-cumulative,  and  nature  of  preference  as  to  divi- 
dend, voting  power  and  distribution  of  assets ;  location  and  route  of  road ; 
description  of  property  and  total  mileage  in  operation ;  contemplated 
extensions ;  total  equipment ;  amount  of  mortgage  lien,  date  of  maturity 
and  rate  of  interest ;  amount  of  other  indebtedness  or  liability,  jointly  or 
severally,  for  leases,  guarantees,  rentals  and  car  trusts,  and  terms  of  pay- 
ment thereof;  distribution  of  securities;  disposition  of  proceeds  of  sale; 
name  and  location  of  Transfer  Agent  and  Registrar ;  address  of  main  office 
of  Company,  list  of  Officers  and  Directors  (classified),  date  of  annual  meet- 
ing, end  of  fiscal  year ;  agreement  with  the  Exchange  to  publish  annual 
reports,  to  maintain  a  transfer  office  in  New  York  City,  and  to  give  at 
least  ten  days'  notice  in  advance  of  the  closing  of  the  books  for  any 
purpose. 

Bonds 

Application  for  the  listing  of  an  original  issue  of  Mortgage  Bonds  of  a 
Railroad  Company  will  be  considered  on  completed  mileage  only.  Other 
issues  may  be  applied  for  based  upon  new  conditions  governing  the  growth 
and  extension  of  the  line,  its  future  requirements,  and  financial  exhibits. 

Application  must  recite  the  full  title  of  the  bonds,  denominations, 
amounts  of  authorized  and  outstanding  issue,  date  and  maturity ;  amount 
applied  for  and  numbers,  with  a  full  description  of  the  bonds,  names  of 


280  APPENDIX 

Trustees,  rates  of  interest,  when  and  where  payable ;  whether  the  bonds  are 
subject  to  redemption  by  Sinking  Fund  or  otherwise ;  terms  of  exchange 
or  convertibility,  if  any,  into  other  securities ;  whether  issued  in  coupon  or 
registered  form,  or  both,  and,  if  the  latter,  whether  they  are  interchangeable ; 
if  Coupon  Bonds  only  are  issued,  whether  they  have  privilege  of  registration 
as  to  principal;  purposes  of  issue  and  disposition  of  proceeds;  terms  of 
issue  of  additional  amounts  as  provided  for  in  the  Mortgage  or  Trust  Deed. 
Special  clauses  in  the  Mortgage  reciting  terms  of  issue  and  redemption, 
and  restrictions  or  limitations  of  unusual  character  should  be  outlined. 

A  tabulated  statement  must  be  furnished  with  the  list  of  properties 
owned,  acquired  and  operated  by  the  Company,  showing  those  covered 
by  the  Mortgage  or  other  Indenture  under  which  the  bonds  are  issued  ; 
those  covered  by  prior  liens ;  bonded  indebtedness  of  acquired  or  oper- 
ated Companies  with  details ;  whether  such  Companies  are  owned  in  fee, 
or  by  ownership  of  bonds  and  stocks,  and  the  amount  of  such  bonds  and 
stocks  owned,  authorized  and  issued ;  also  Certified  Copy  of  action  of 
Stockholders  and  Directors  authorizing  the  reservation  of  stock  equal  to 
amount  of  Convertible  Bonds. 

Opinion  of  Counsel  should  approximate  the  following  form  : 

"We  have  examined  the  Mortgage,  dated , ,  made  by  the 

Company  to  the Trust  Company  of as  Trustee,  to  secure  an  issue 

of Bonds  of  said  Company  to  an  amount  not  to  exceed  $  —    — .     We  are 

of  opinion  that  the  actions  of  the  Directors  and  Stockholders  in  respect  to  this 
Mortgage  were  in  conformity  with  the  laws  of  the  State  of  —  —  and  are  in 
accordance  with  the  laws  of  all  States  in  which  the  property  so  mortgaged  is 
situated,  and  that  the  Mortgage  and  bonds  therein  referred  to  are,  in  all  respects, 
valid  and  binding  obligations  of  said  Company." 

When  bonds  are  intended  to  replace  one  or  more  prior  issues,  the 
Committee  will  require  evidence  of  the  satisfaction  of  prior  liens. 

A  copy  of  the  Mortgage  must  be  furnished,  with  a  Copy  of  Certificate 
from  the  County  Clerk  in  each  County  in  which  the  mortgaged  property  is 
located,  that  the  Mortgage  has  been  recorded  in  such  County.  Should  the 
laws  of  the  State  not  require  a  record  to  be  made  in  the  several  Counties, 
a  Copy  of  Certificate  of  the  Secretary  of  the  State,  showing  the  legal  rec- 
ord, shall  be  filed.  This  copy  of  the  Mortgage  must  be  certified  by  the 
Trustee  to  be  a  true  copy. 

When  a  Trust  Indenture  provides  that  bonds  may  be  issred  in  coupon 
and  registered  form,  each  Registered  Bond  issued  thereunder  shall  declare 
that  it  is  issued  in  lieu  of,  or  in  exchange  for,  Coupon  Bonds  whose  num- 
bers are  distinctly  stated  in,  or  are  endorsed  upon,  said  Registered  Bond, 
and  that  said  numbered  Coupon  Bonds  are  not  contemporaneously  issued 
and  outstanding. 


APPENDIX  28l 

When  any  Coupon  Bond  or  Bonds  shall  be  surrendered  in  exchange  for 
Registered  Bonds,  there  shall  be  issued  a  like  amount  of  Registered  Bonds 
bearing  statement  therein,  or  endorsed  thereon,  of  the  serial  number  or 
numbers  borne  by  the  Coupon  Bonds  so  surrendered  for  exchange,  which 
Coupon  Bonds  shall  be  immediately  cancelled  by  the  Trustee. 

In  each  case  of  transfer  of  a  Registered  Bond,  the  bond  issued  because 
of  such  transfer  shall  have  recorded  therein,  or  endorsed  thereon,  the  same 
serial  numbers  of  Coupon  Bonds  as  are  recited  in  the  surrendered  bond  as 
being  specially  reserved  for  said  surrendered  bond. 

In  any  exchange  of  Registered  Bonds  for  Coupon  Bonds,  the  numbers 
of  the  Coupon  Bonds  so  issued  shall  correspond  with  those  stated  in  the 
surrendered  Registered  Bond. 

Papers  to  be  filed  with  Applications 

For  listing  Stocks: 

Seven  copies  of  the  Charter  or  Articles  of  Incorporation,  one  copy  to  be 
attested  by  the  Secretary  of  .State  in  which  the  Company  is  incorporated. 

Seven  copies  of  By-laws,  one  copy  to  be  attested  by  Secretary  of  Company. 

Seven  copies  of  Leases  and  Special  Agreements,  one  copy  of  each  to  be 
attested  by  the  Secretary  of  the  Company. 

Seven  copies  of  Income  Account,  covering  at  least  one  year  of  actual  opera- 
tion of  the  Company,  and  seven  copies  of  the  Balance  Sheet  at  the  end  of  said 
year ;  one  copy  of  each  to  be  certified  by  an  authorized  Public  Accountant,  or 
the  Auditor  of  the  Company. 

One  copy  of  Resolutions  of  Stockholders  authorizing  issue,  and  of  the  action 
of  the  Directors  thereunder,  attested  by  Secretary  of  the  Company. 

Opinion  of  Counsel  as  to  legality  of  authorization  and  issue  of  securities. 

Certificate  of  Registrar  as  to  amount  of  securities  registered  at  date  of  appli- 
cation. 

Certified  copy  of  Agreement  to  publish  annual  reports,  to  maintain  a  transfer 
office  in  New  York  City,  and  to  give  at  least  ten  days1  notice  in  advance  of  the 
closing  of  the  books  for  any  purpose. 

Report  of  a  duly  qualified  Civil  Engineer  covering  the  actual  physical  condi- 
tion of  the  property  as  of  recent  date. 

Map  of  the  road  and  contemplated  extensions. 

Full  set  of  specimens  of  securities  of  the  Company. 

In  addition  to  the  foregoing,  for  listing  Bonds  : 

Six  additional  copies  of  the  Mortgage  or  Trust  Deed. 
Opinion  of  Counsel  shall  cover  — 

a  as  to  organization, 

b  as  to  validity  of  issue, 

c  as  to  real  estate  in  fee. 
Trustees'  Certificate  shall  cover  — 

a  as  to  acceptance, 

b  as  to  issuance  under  the  terms  of  the  Mortgage, 


282  APPENDIX 

c  as  to  securities  held, 

d  as  to  cancellation  or  cremation  of  underlying  and  unissued  securities, 
prior  liens,  etc. 

Corporations  other  than  Railroads 

Application  for  an  original  listing  of  securities  of  Corporations  other 
than  Railroads  must  recite  the  title  of  the  Company,  date  of  organization 
and  authority  for  same ;  amount  of  authorized  Capital  Stock  and  amount 
issued,  par  value,  rate  of  dividend ;  voting  power,  if  full  or  partially  paid ; 
if  personal  liability  attaches  to  ownership ;  if  Preferred  Stock  is  authorized, 
nature  of  preference  as  to  dividends,  whether  cumulative  or  non-cumula- 
tive, voting  power  and  distribution  of  assets ;  whether  an  original  organiza- 
tion or  a  consolidation  of  several  previously  existing  firms  or  corporations ; 
if  a  consolidation,  a  concise  history  of  its  organization,  and  the  names  and 
locations  of  constituent  Companies;  whether  the  constituent  Companies 
are  owned  in  fee  or  otherwise,  and  amounts  of  authorized,  issued  and 
owned  stocks  of  same ;  a  full  description  of  the  property,  real,  personal 
and  leased ;  if  real  estate  is  owned  in  fee,  the  acreage  thereof,  and  the 
character  of  buildings  thereon  ;  nature  and  character  of  product ;  business 
proposed  to  be  transacted  ;  duration  of  Charter  and  Charters  of  subsidiary 
Companies ;  statement  of  special  rights  and  privileges  conveyed  to  the 
Company  under  its  Charter,  or  to  its  Directors  under  the  By-laws ;  agree- 
ment with  the  Exchange  by  which  the  Company  binds  itself  to  the 
following : 

That  it  will  not  dispose  of  its  interest  in  any  constituent  Company,  or  allow 
any  of  said  Companies  to  dispose  of  its  interests  in  other  Companies,  except  on 
direct  authorization  of  Stockholders. 

That  it  will  not  speculate  in  its  own  or  constituent  Companies1  securities,  or 
permit  similar  speculations  by  any  of  its  constituent  Companies. 

That  it  will  publish  at  least  once  in  each  year  and  submit  to  the  Stockhold- 
ers, at  the  annual  meeting  of  the  Company,  a  detailed  statement  of  its  physical 
and  financial  condition,  an  Income  Account  covering  the  previous  fiscal  year, 
and  a  Balance  Sheet  showing  assets  and  liabilities  at  the  end  of  the  year;  also 
Income  Account  and  Balance  Sheet  of  any  subsidiary  Company. 

Papers,  properly  attested,  as  set  forth  in  list  to  be  filed  with  applica- 
tions of  Railroad  Companies,  must  also  be  filed. 

Reorganized  Corporations 

Application  to  list  securities  of  a  corporation  which  has  been  insolvent, 
or  has  been  reorganized,  must  contain  a  concise  history  of  the  corporation, 
and  of  its  predecessor,  together  with  a  statement  of  the  reason  for  its 
reorganization ;  history  of  proceedings  if  property  was  sold  under  fore- 
closure ;  amount  and  description  of  all  securities  which  have  been  author- 
ized and  issued  by  the  new  Company ;  amount  of  those  issued  in  lieu  of, 


APPENDIX  283 

or  exchanged  for,  any  of  the  preceding  issues;  purposes  and  terms  in 
detail  under  which  additional  securities  of  the  Reorganized  Company  may 
be  issued;  amount  and  description  of  the  various  securities  which  have 
been  retired,  cancelled,  deposited,  or  otherwise  held,  or  are  still  outstanding. 

The  following  papers  must  be  filed,  in  addition  to  those  previously  re- 
ferred to; 

Certified  copies  of  legal  proceedings  and  Order  of  Court  confirming  sale. 

Income  Account  of  the  predecessor  Company  for  a  period  of  at  least  one 
year  prior  to  reorganization,  and  final  Balance  Sheet ;  also  a  Balance  Sheet  of 
the  new  Company  at  date  of  reorganization,  all  of  which  shall  be  certified  by  an 
authorized  Public  Accountant,  or  the  Auditor  of  the  Company. 

Opinion  of  Counsel  that  the  proceedings  have  been  in  conformity  with  legal 
requirements,  that  the  title  to  the  property  is  vested  in  the  new  corporation,  and 
is  free  and  clear  from  all  liens  and  incumbrances,  except  as  distinctly  specified. 

Certificate  of  cancellation,  deposit,  or  holding  of  prior  issues. 

Certified  copies  of  new  Mortgages  or  Deeds  of  Trust. 

Additional  Amounts  of  Listed  Securities 

State  amount  and  character  of  such  additional  issues,  public  distribu- 
tion, and  disposition  of  proceeds  of  sale ;  amounts  covered  by  prior  appli- 
cations for  listing  to  which  reference  should  be  made  by  giving  numbers 
and  dates  of  applications ;  amount,  description  and  disposition  of  securities 
exchanged  for  new  issues ;  describe  additional  property  acquired  and  its 
present  physical  condition ;  file  attested  copies  of  Resolutions  of  Stock- 
holders and  action  of  Directors  as  to  issuance  of  the  additional  securities, 
and  opinion  of  Counsel  as  to  validity  of  issue ;  if  authorized  Capital  Stock 
is  increased,  a  Certificate  of  such  increase  from  the  Secretary  of  State; 
certified  copies  of  Income  Account  and  Balance  Sheet  of  recent  date. 

The  Registrar  shall  not  register  any  additional  stock  until  notified  by 
the  Committee  that  such  stock  has  been  duly  listed. 

Thirty  days'  notice  of  any  proposed  increase  of  Capital  Stock  of  a 
Corporation  shall  be  given  to  the  Exchange,  before  such  increase  will  be 
eligible  for  listing. 

When  the  Capital  Stock  of  a  corporation  is  increased  through  conver- 
sion of  convertible  bonds,  already  listed,  the  issuing  corporation  shall  give 
immediate  notice  to  the  Exchange,  and  this  Committee  may  thereupon 
authorize  the  registration  of  such  shares  and  add  them  to  the  list. 

The  Governing  Committee  may  suspend  dealings  in  the  securities  of 
any  corporation  previously  admitted  to  quotation  upon  the  Exchange,  or  it 
may  summarily  remove  any  security  from  the  list. 

Trustees  of  Mortgages 

The  Committee  recommends  that  a  Trust  Company  or  other  Corpora- 
tion be  appointed  Trustee  of  each  Mortgage  or  Trust  Deed ;  when  a  State 


284  APPENDIX 

law  requires  the  appointment  of  a  local  individual  Trustee,  that  a  Trust 
Company  or  other  corporation  be  appointed  as  Co-Trustee. 

The  Committee  will  not  approve  of  an  officer  of  an  applicant  corpora- 
tion as  a  Trustee  of  securities  issued  by  it,  nor  will  it  regard  such  officer  or 
director  as  qualified  to  give  opinion  as  Counsel  on  any  legal  question  affect- 
ing the  Corporation. 

In  all  cases  where  two  or  more  liens  have  been  placed  upon  the  same 
real  property  of  a  corporation,  each  lien  must  be  represented  by  a  Trustee  or 
Trustees  entirely  separate  and  distinct  from  those  to  whom  any  other  liens 
upon  the  same  real  property,  either  in  part  or  in  entirety,  have  been 
entrusted. 

The  Trustee  must  present  a  certificate  acknowledging  the  acceptance 
of  the  trust  and  giving  the  numbers  and  amount  of  bonds  executed  in 
accordance  with  the  terms  of  the  Mortgage ;  if  the  Trust  Deed  requires  the 
deposit  of  collateral  as  security  for  the  Mortgage,  the  Trustee  shall  certify 
to  the  deposit  of  such  collateral,  specifying  it  in  detail.  In  the  matter  of 
additional  issues  of  bonds  the  Trustee  must  certify  that  such  increase  has 
been  made  in  conformity  with  the  terms  of  the  Trust  Deed,  and  that  the 
lien  of  the  Mortgage  has  been  duly  recorded  against  any  new  property 
acquired,  or  that  the  required  additional  collateral  has  been  duly  deposited. 

Transfer  and  Registry 

A  Corporation  is  required  to  maintain  a  Transfer  Agency  and  a  Reg- 
istry Office  in  the  City  of  New  York,  Borough  of  Manhattan.  Both  the 
Transfer  Agency  and  the  Registrar  must  be  acceptable  to  the  Committee 
on  Stock  List ;  the  Registrar  must  file  with  the  Secretary  of  the  Exchange 
an  agreement  to  comply  with  the  requirements  of  the  Exchange  in  regard 
to  registration. 

A  Trust  Company  or  other  agency  or  individual  shall  not  at  one  and 
the  same  time  act  as  Transfer  Agent  and  Registrar  of  a  corporation. 

When  a  Company  has  its  stock  transferred  at  its  own  office,  a  Transfer 
Agent  or  Transfer  Clerk  shall  be  appointed  by  authority  of  the  Board  of 
Directors  to  countersign  certificates,  who  shall  be  an  individual  other  than 
an  officer  authorized  by  the  By- Laws  of  the  Company  to  sign  Certificates 
of  Stock. 

The  entire  amount  of  the  Capital  Stock  of  a  Corporation  listed  upon 
the  Exchange  must  be  directly  transferable  at  the  Transfer  Office  of  the 
Company  in  the  City  of  New  York. 

When  a  Corporation  also  makes  transfer  of  its  shares  in  other  cities,  the 
certificates  issued  therefrom  shall  be  interchangeable,  and  be  identical  in 
form  and  color  with  the  New  York  Certificates,  except  as  to  the  names 
of  the  Transfer  Agent  and  the  Registrar. 


APPENDIX  285 

Certifications  of  registry  shall  provide  for  the  signature  of  an  executive 
officer  of  the  Corporation  acting  as  Registrar,  /.<?.,  an  officer  having  general 
powers  to  sign  for  the  Corporation. 

A  change  in  the  form  of  certificate,  or  of  the  Transfer  Agency,  or  the 
Registrar,  or  of  the  Trustee  of  bonds,  shall  not  be  made  without  the  ap- 
proval of  this  Committee. 

Engraved  Certificates  Required 

Every  Bond,  Coupon,  or  Certificate  of  Stock  must  be  printed  from 
steel  plates,  which  have  been  engraved  in  the  best  manner  and  which  have 
such  varieties  of  work  as  will  afford  the  greatest  security  against  counter- 
feiting. 

For  each  document  or  instrument  there  must  be  at  least  two  steel 
plates,  viz. :  A  Face  plate  containing  the  vignettes  and  lettering  of  the 
descriptive  or  promissory  portion  of  the  document,  which  should  be 
printed  in  black,  or  in  black  mixed  with  a  color ;  also  a  Tint  plate  from 
which  should  be  made  a  printing  in  an  anti-photographic  color,  so  arranged 
as  to 'underlie  important  portions  of  the  face  printing. 

These  two  printings  must  be  so  made  upon  the  paper  that  the  com- 
bined effect  of  the  whole,  if  photographed,  would  be  a  confused  mass  of 
lines  and  forms,  and  so  give  as  effectual  security  as  possible  against  coun- 
terfeiting by  any  scientific  or  other  process.  The  imprint  of  each  denomi- 
nation of  bonds  must  be  of  such  distinctive  appearance  and  color  as  to 
make  it  readily  distinguishable  from  other  denominations  and  issues.  It  is 
required  for  each  class  of  stock  issued  that  there  shall  be  a  distinctively 
engraved  plate  for  one  hundred  shares  with  said  denomination  engraved 
thereon  in  words  and  figures ;  for  certificates  issued  for  smaller  amounts 
there  shall  be  a  similar  plate,  distinctive  in  design  and  color,  for  each 
issue;  there  shall  be  engraved  thereon  some  device  whereby  the  exact 
denomination  of  the  certificate  may  be  distinctly  designated ;  also  conspic- 
uously the  words,  "  Certificate  for  less  than  one  hundred  shares" 

It  is  recommended  that  the  terms  of  redemption  by  sinking  fund  or 
otherwise,  and  of  conversion  into  other  forms  of  securities,  be  shown  in  the 
text  of  bonds :  also  that  the  terms  of  preference  or  other  privilege  hi  the 
issues  of  stocks  be  stated  on  the  face  of  the  certificates. 

All  Certificates  should  bear  upon  their  face  the  following : 

"  This  Certificate  is  not  valid  until  countersigned  by  the  Transfer  Agent 
and  the  Registrar" 

It  is  required  that  a  specimen  of  each  issue  of  stocks  or  bonds  shall  be 
referred  to  the  Committee  for  acceptance  as  to  form,  character,  and  work- 
manship, prior  to  application  for  their  listing;  no  form  of  Stock  Certificate 
or  Bond  will  be  accepted  unless  it  has  been  engraved  by  some  Bank-Note 


286  APPENDIX 

Engraving  Company  whose  work  this  Committee  has  been  authorized  by  the 
Governing  Committee  to  pass  upon. 

The  name  of  the  Engraving  Company  must  appear  upon  the  face  of 
each  bond  and  Certificate  of  Stock,  and  also  upon  the  face  of  each  coupon 
and  the  title  panel  of  the  bond. 

The  Committee  will  object  to  any  security  upon  which  an  impress  is 
made  by  a  stamp. 

A  Power  of  Attorney  indorsed  upon  a  Certificate  of  Stock  must  be 
irrevocable  with  a  bill  of  sale  and  power  of  substitution.  The  following 
form  is  suggested : 

For  value  received hereby  sell,  assign,  and  transfer  unto 

Shares 

of  the  Capital  Stock  represented  by  the  within  Certificate,  and  do  hereby 
irrevocably  constitute  and  appoint 

Attorney 

to  transfer  the  said  stock  on  the  Books  of  the  within  named  Company  with 
full  power  of  substitution  in  the  premises. 

Dated. 19. 


In  presence  of 


Certificates  of  Deposit  in  Trust 

Institutions,  Firms,  or  Corporations,  depositaries  of  securities  under 
plans  of  reorganization,  protective  or  associate  action,  are  requested 
to  accept  on  deposit  only  such  securities  as  are  a  delivery  in  the  Exchange; 
provided,  that  in  any  case  where  said  depositaries  find  it  necessary  to 
accept  securities  which  are  not  a  delivery,  they  shall  issue  therefor  a 
distinctive  certificate  which  will  indicate  the  irregularity.  Agreements 
for  deposit  of  securities  for  protective  or  associate  action  must  be  limited 
to  a  specified  time  for  continuance,  within  which  a  plan  of  reorganization 
or  adjustment  will  be  presented  to  the  certificate  holders  for  acceptance, 
or  in  default  thereof  such  holders  will  be  granted  opportunity  to  withdraw 
the  securities  represented  by  their  certificates,  and  terminate  their  agree- 
ment. Penalty  for  delay  in  depositing  securities  under  any  agreement 
should  not  be  imposed  until  all  holders  of  such  securities  have  had  rea- 
sonable opportunity  for  depositing,  after  the  listing  of  the  Certificates  of 
Deposit. 

When  bonds  are  deposited  with  Institutions,  Firms,  or  Corporations, 
which  are  depositaries  under  plans  of  reorganization,  protective  or  asso- 


APPENDIX  287 

ciate  action,  certificates  therefor  will  be  considered  as  representing  the 
deposit  of  Coupon  bonds.  Certificates  issued  for  deposit  of  Registered 
Bonds  or  bonds  not  a  delivery  in  the  Exchange  must  bear  on  their  fact 
evidence  of  such  fact.  Certificates  of  Deposit  for  securities,  whether  for 
reorganization,  protective  or  associate  action,  or  for  Voting  Trustees, 
must  bear  the  countersignature  of  some  institution  as  Registrar,  in  same 
manner  as  Certificates  for  Stock. 

Annual  Reports 

The  Exchange  requires  of  all  corporations  whose  securities  are  ad- 
mitted to  the  Stock  List,  that  they  shall  print,  publish,  and  distribute  to 
stockholders,  at  least  fifteen  days  prior  to  annual  meetings,  a  full  report 
of  their  operations  during  the  preceding  fiscal  year;  complete  and  de- 
tailed statements  of  all  income  and  expenditures,  and  a  Balance  Sheet 
showing  their  financial  condition  at  the  close  of  the  given  period.  The 
Exchange  requests  that  stockholders  of  corporations  take  such  action  as 
may  be  necessary  to  make  this  requirement  effective. 


NEW  YORK   STOCK    EXCHANGE 

RULES  FOR  DELIVERY 
(ART.  XXV,  SEC.  3,  CONSTITUTION) 

i.  Securities  admitted  to  dealings  upon  the  New  York  Stock  Ex- 
change, Registered  and  Transferable  in  the  Borough  of  Manhattan,  City 
of  New  York,  in  conformity  with  the  requirements  of  Section  i,  Art. 
XXXIII  of  the  Constitution,  are  a  delivery:  — 

(a)  Certificates  of  Stock  for  100  shares  or  odd  lots  aggregating  100 
shares,  with  irrevocable  Assignment  for  each  Certificate,  and 
in  the  name  of  a  member  or  his  firm,  registered  and  doing 
business  in  the  Borough  of  Manhattan.  Certificates  for  the 
exact  amount  or  aggregating  the  amount  of  an  odd  lot. 

(£)  Or  with  irrevocable  Assignment  witnessed  by,  or  correctness  of 
signature  guaranteed  by  such  member  or  his  firm. 

(t)  Or  with  irrevocable  Assignment  and  Power  of  Substitution  and  a 
separate  guarantee  by  such  member  or  his  firm,  for  each 
Power  of  Substitution. 

(d)  Coupon  Bonds  payable  to  Bearer,  in  denominations  of  $500  or 
$1000  each,  with  proper  coupons  of  the  bond's  number  se- 
curely attached.  Small  bonds,  under  $500,  only  in  special 


288  APPENDIX 

transactions.  The  money  value  of  a  missing  coupon  may  be 
substituted  only  with  the  consent  of  the  Committee  on  Secu- 
rities for  each  delivery. 

(e)  Registerable  Coupon  Bonds  in  denominations  of  $500  or  $1000 
registered  to  Bearer,  or  when  transfer  books  are  closed,  with 
an  Assignment  to  Bearer  for  each  bond  by  a  member  or  his 
firm  or  witnessed  by  a  member,  or  the  correctness  of  the 
signature  guaranteed  by  a  member  or  his  firm,  registered  and 
doing  business  in  the  Borough  of  Manhattan. 

(/)  Registered  Bonds  in  denominations  not  exceeding  $10,000  prop- 
erly assigned. 

2.  Securities  contracted  for  in    amounts   exceeding  100  shares  of 
Stock  or  $10,000  in  Bonds,  may  be  tendered  in  lots  of  100  shares  of 
Stock  or  $10,000  in  Bonds,  or  any  multiple  of  either,  and  must  be  accepted 
and  paid  for  as  delivered. 

3.  Securities  with  assignment,  or  Power  of  Substitution,  signed  by 
an  Insolvent,  are  not  a  delivery.     During  the  close  of  transfer  books, 
such  securities  held  by  others  than  the  insolvent,  are  a  delivery  if  accom- 
panied by  an  affidavit  for  each  certificate  or  bond,  that  said  securities 
were  held  on  a  date  prior  to  the  insolvency. 

Securities  with  Assignment  or  with  Power  of  Substitution,  guaranteed 
by  a  member  or  his  firm,  suspended  for  Insolvency,  are  not  a  delivery 
and  must  be  reguaranteed  by  a  solvent  member  or  his  firm. 

4.  Securities  in  the  name  of  a  deceased  person,  or  a  firm  that  has 
ceased  to  exist  are  not  a  delivery,  except  during  the  closing  of  the  trans- 
fer books.     The  Assignment  must  be  proved  or  acknowledged  before  a 
Notary  Public.     (Form  No.  3,  for  witness  10  and  u.) 

Securities  with  either  the  Assignment  or  any  Power  of  Substitution 
witnessed  by  a  deceased  person  are  not  a  delivery. 

5.  Securities  assigned,  or  a  Power  of  Substitution  by  a  firm  that  has 
dissolved  and  is  succeeded  by  one  of  the  same  name,  are  a  delivery, 
when  the  new  firm  shall  have  signed  the  statement  "  Execution  guar- 
anteed," under  a  date  subsequent  to  the  formation  of  the  new  firm. 

6.  Securities  in  the  name  of  a  corporation  or  an  institution  or  in  a 
name  with  official  designation,  are  not  a  delivery,  unless  Assignment  is 
sworn  to  before  a  Notary  Public.     The  Notary  Public  must  also  make 
a  deposition  that  he  has  seen  the  minutes  of  the  institution  authorizing 
the  person  or  persons  signing  to  make  the  Assignment.     (Forms  8  and 
9.)     A  certified  copy  of  the  resolutions  of  the  proper  authorities  of  the 
Company  in  whose  name  the  security  stands,  authorizing  the  Assignment, 
and  giving  date  of  adoption,  must  accompany  the  security. 

7.  Securities  with  an  Assignment  or  a  Power  of  Substitution  signed 


APPENDIX  289 

by  Trustees,  Guardians,  Infants,  Executors,  Administrators,  Assignees 
and  Receivers  in  Bankruptcy,  Agents  or  Attorneys  are  not  a  delivery. 

8.  Securities  assigned  by  a  Married  Woman  are  not  a  delivery.     A 
joint  assignment  and  acknowledgment  by  husband  and  wife  before   a 
Notary  Public,  will  make  such  security  a  delivery  only  while  the  transfer 
books  are  closed.     (Form  No.  4.) 

9.  Securities  in  the  name  of  an  Unmarried  Woman,  with  the  prefix 
"Miss,"  are  a  delivery  without  notarial  acknowledgment,  when  signed 
"  Miss." 

10.  Securities  in  the  name  of  an  Unmarried  Woman  (without  the 
prefix  "  Miss  "),  or  a  Widow  are  a  delivery  only  when  the  Assignment  is 
acknowledged  before  a  Notary  Public.     (Form  No.  5.) 

11.  Securities  of  a  Company  whose  transfer  books  are  closed  in- 
definitely for  any  reason,  legal  or  otherwise,  the  Assignment  and  each 
Power  of  Substitution  must  be  acknowledged  before  a  Notary  Public. 
(Forms  No.  2,  3,  for  witness  10  and  11.) 

12.  Securities  in  the  name  of  Foreign  Residents  are  not  a  delivery 
on  the  day  the  transfer  books  are  closed  for  payment  of  a  Dividend  or 
Registered  interest,  and  reclamation  can  only  be  made  on  that  day. 

13.  Securities  in  the  name  of  Foreign  Residents  must  be   accom- 
panied by  an  acknowledgment  before  a  United  States  Consul  or  J.  S. 
Morgan  &  Co.,  London,  when  required  by  transfer  agents. 

Several  companies  having  transfer  offices  at  Grand  Central  Station, 
New  York,  make  this  requirement. 

14.  Certificate  of  Stock  on  which  the  name  of  a  transferee  has  been 
filled  in  error,  may  be  made  a  delivery  during  the  closing  of  the  transfer 
books  by  ruling  of  the  Committee  on  Securities.      Necessary  form  of 
release,  cancellation  and  reassignment  will  be  furnished  on  application  to 
the  Committee  on  Securities. 

15.  An  endorsement  by  a  member  or  his  firm  registered  and  doing 
business  in  the  Borough  of  Manhattan,  or  the  signature  as  a  witness  by 
such  a  member,  of  a  signature  to  an  Assignment  or  a  Power  of  Substitu- 
tion, is  a  guarantee  of  its  correctness.     Each  Power  of  Substitution,  as 
well  as  the  Assignment,  must  be  so  guaranteed,  or  witnessed. 

1 6.  The  Receiver  of  Stock  may  demand  delivery  by  transfer  when 
the  transfer  books  are  open,  and  must  give  ample  time  in  which  to  make 
transfer.     The  Seller  may  demand  payment  for  the  securities  at  the  time 
and  place  of  transfer.     The  Seller  may  make  delivery  by  transfer  when 
personal  liability  attaches  to  ownership. 

17.  When  a  claim  is  made  for  a  dividend  on  Stock  after  the  transfer 
books  have  been  closed,  the  party  in  whose  name  the  Stock  stands  may 
require  from  the  claimant  presentation  of  the  certificate,  a  written  state- 


290  APPENDIX 

ment  that  he  was  the  holder  of  the  Stock  at  the  time  of  the  closing  of 
the  books,  a  guarantee  against  any  future  demand  for  the  same  and  the 
privilege  to  record  on  the  certificate  evidence  of  the  payment  by  Cash  or 
Due  Bill. 

18.  "  Coupon  Bonds  issued  to  Bearer,  having  an   endorsement  upon 
them   not  properly  pertaining  to  them  as  a  security,  must  be  sold  spe- 
cifically as  '  Endorsed  Bonds,1  and  are  not  a  delivery,  except  as  '  Endorsed 
BondsS"  —  Extract  from  Resolutions   of  Governing   Committee,  adopted 
May  23,  1883. 

A  definite  name  of  a  person,  firm,  corporation,  an  association,  etc., 
such  as  "  John  Smith,"  "  Brown,  Jones  &  Co.,"  "  Consolidated  Bank," 
appearing  upon  a  Coupon  Bond,  and  not  placed  there  for  any  purpose  of 
the  Company  by  any  of  its  officers,  implies  ownership,  and  is  an  "  En- 
dorsed Bond  "  under  the  above  resolution. 

19.  Any  endorsement  on  a  Coupon  Bond,  stating  that  it  has  been 
deposited  with  a  State  for  bank  circulation  or  insurance   requirement, 
may  be  released  and  release  acknowledged  before  a  Notary  Public ;  it 
will  then  be  a  delivery  as  a  "  Released  Endorsed  Bond." 

"Rights  to  Subscribe" 

20.  Assignments  of  "  Rights,"  with  the  signature  of  the   assignor 
witnessed  and  guaranteed  in  the  same  manner  as  other  assignments  as 
provided  in  these  rules,  are  a  delivery :  — 

(a)  An  Assignment  of  the  "  Rights  "  accruing  on  each  100  shares  ;  or, 

Assignments  of  "  Rights  "  on  odd  lots  aggregating  the  "  Rights" 

on  100  shares. 
(£)  An  Assignment  for  the  exact  amount,  or  Assignments  aggregating 

the  amount,  on  a  sale  of  the  "  Rights  "  accruing  on  an  odd  lot 

of  stock. 

21.  Assignments  of  "Rights"  in  the  name  of  a  Married  Woman, 
Widow,  or  an  Unmarried  Woman  are  a  delivery  without  notarial  acknowl- 
edgment. 

22.  Assignments  of  "  Rights  "  made  by  a  deceased  person  or  a  firm 
that  has  ceased  to  exist  are  not  a  delivery,  and  must  be  taken  back  by 
the  party  delivering  them. 

23.  Assignments  of  "  Rights  "  signed  by  Trustees,  &c.,  or  for  corpo- 
rations,  &c.,  are   not  a  delivery,  until  passed  by  the   Committee  on 
Securities. 

24.  "  Rights  "  may  be  dealt  in  after  a  day  to  be  fixed  by  the  Commit- 
tee on  Securities.     Warrants  for  Rights  are  deliverable  upon  a  subsequent 
day  to  be  fixed  by  the  Committee ;  after  said  day  all  dealings  shall  be  as  in 
other  securities. 


APPENDIX  291 

25.  Due  Bills  for  "Rights"  accompanying  stock,  which  by  ruling  of 
the  Committee  on  Securities,  does  not  sell "  Ex-Rights  "  at  the  closing  of 
the  books,  must  be  redeemed  on  a  day  fixed  by  the  Committee  on 
Securities. 

26.  Contracts  in  Warrants  for  "Rights"  may  be  enforced  "under  the 
rule." 

Reference  is  made  to  Section  2  of  Article  XXXII  of  the  Constitution  for 
method  of  settlement  of  contracts  carrying  "  Rights  "  other  than  those  cov- 
ered by  24.  and  25  of  these  Rules,  and  also  for  Rights  accruing  during  the 
pendency  of  a  contract. 

Reclamations 

27.  Reclamation  for  irregularity  in  a  security,  when  such  irregularity 
affects  only  its  currency  in  the  market,  must  be  made  within  ten  days  from 
day  of  delivery  of  the  security.     (Article  XXIX,  Constitution.)     A  secu- 
rity with  any  irregularity  having  been  delivered  may  be  returned  up  to 
2.15  o'clock  P.M.,  to  the  party  who  delivered  it,  who  must  immediately  give 
the  party  presenting  it  either  the  security  in  proper  form  for  delivery,  or 
pay  the  market  price  of  the  security,  and  assume  all  liability  for  non-de- 
livery.    In  the  latter  case,  the  security  in  proper  form  may  be  delivered  to 
the  claimant  before  2.15  P.M.,  and  the  amount  paid  shall  be  returned. 


Signatures  to  Assignments  and  Due  Bills 

28.  The  signature  to  an  Assignment  or  a  Power  of  Substitution  must 
be  technically  correct,  i.e.  it  must  correspond  in  every  particular,  without 
any  change,  with  the  name  in  which  the  security  is  issued,  and  the  name 
of  the  Attorney  or  Substitute. 

The  date  of  an  Assignment  or  a  Power  of  Substitution  must  be  legible, 
and  any  correction  properly  noted  by  the  signer. 

(a)  Titles  must  be  prefixed  or  affixed  to  signatures  exactly  as  they 

are  in  the  name  in  which  the  security  is  issued. 

(b)  "  Brothers  "  or   "  Bros."  must  be  written  as  it  appears  in  the 

security. 

(c)  "  And  "  or  "  &  "  "  Company  "  or  "  Co."  may  be  written  either  way. 
(a*)  "  Mr.,"  "  Messrs.,"  "  Esq.,"  or  the  Residence  or  business  Address 

of  an  individual  or  firm  need  not  be  made  part  of  the  signature. 

(e)    Due  Bills  must  be  signed  by  a  member  or  a  firm  registered  and 
doing  business  in  the  Borough  of  Manhattan. 


292  APPENDIX 

The.  committee  recommends  :  — 

That  Transfer  Agents  be  given  the  exact  form  of  the  name  to  which 
securities  are  to  be  transferred. 

That  the  signatures  of  all  members  and  the  firm  signatures  of  each  of  the 
partners  in  a  member's  firm  doing  business  in  the  Borough  of  Manhattan 
be  filed  with  transfer  offices  in  order  to  secure  promptness  of  transfer  of 
securities. 

Assignments  and  Notarial  Acknowledgments 

A  detached  Assignment  of  a  security  must  contain  provision  for  the 
appointment  irrevocable  of  an  attorney,  and  substitute,  and  a  full  descrip- 
tion of  the  security,  *.<?.  name  of  Company,  Issue,  Certificate  or  Bond 
Number  and  amount  (the  latter  written  in  words  and  numerals),  and  must 
be  acknowledged  before  a  Notary  Public  with  seal  and  date.  This 
description  must  be  in  the  same  handwriting  as  the  other  facts  stated. 
A  separate  Assignment  must  accompany  each  certificate  or  bond. 

In  the  acknowledgment  of  an  Assignment  or  Power  of  Substitution 
in  the  name  of  an  individual,  the  Notary  Public  must  certify  with  seal 
and  date  that  he  knows  the  person  signing  to  be  the  person  named  in 
the  security,  or  in  the  Power  of  Substitution  and  that  the  signer  ac- 
knowledged his  signature. 

An  Assignment  or  Power  of  Substitution  in  the  name  of  a  firm,  the 
Notary  Public  must  certify  that  he  knows  the  person  and  knows  him  to 
be,  or  to  have  been  on  the  date  of  the  execution,  a  member  of  the  firm, 
and  that  he  acknowledged  that  he  executed  the  Assignment  or  Power  of 
Substitution  as  the  act  and  deed  of  the  firm. 

In  proving,  before  a  Notary  Public,  an  Assignment  or  Power  of  Sub- 
stitution, the  witness  must  make  deposition  that  he  knows  the  person  who 
executed  the  Assignment  or  Power  of  Substitution,  to  be  the  person 
named  in  the  Security  or  Assignment,  and  saw  the  signer  execute  the 
same.  For  Assignments  of  Securities  in  the  name  of  a  firm,  the  witness 
must  make  deposition  that  he  knows  the  party  signing  to  be  (or  to  have 
been  at  the  date  of  execution)  a  member  of  the  firm. 

Any  alteration  in  the  wording  of  an  Assignment  must  be  stated  over 
the  signature  of  the  party  signing. 

Any  alteration  in  a  Notarial  Acknowledgment  must  be  noted  by  sig- 
nature of  the  Notary. 


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Bank  Section,  American  Bankers'  Association,  1903.  Considers :  Accounts 
opened  by  one  person  for  another,  or  in  trust  for  another ;  joint  accounts  ; 
alternative  joint  accounts  ;  accounts  of  administrators,  executors,  guardians, 
etc.;  accounts  payable  in  a  given  event,  or  subject  to  special  conditions 
or  limitations ;  society  or  corporation  accounts. 


296  BIBLIOGRAPHY 

A  Sketch  of  the  Pennsylvania  Company  for  Insurances  on  Lives  and  Granting 
Annuities.  HARRISON  S.  MORRIS.  Philadelphia,  1896.  pp.  168.  A  history 
of  the  oldest  corporation  in  the  United  States  transacting  a  trust  and  safe 
deposit  business.  This  company  was  founded  in  1809,  chartered  1812,  and 
granted  trust  powers  in  1836.  It  was  the  first  company  in  Pennsylvania  and 
the  third  in  the  United  States  to  receive  trust  powers. 

State  Banking  Departments.  The  Reports  of  the  Banking  Departments  of  most 
of  the  states,  contain  more  or  less  information  in  regard  to  the  Trust  Com- 
panies under  their  control. 

State  Banking  Laws.  The  statutes  of  almost  all  the  states  and  territories  now 
provide  for  the  incorporation  of  Trust  Companies  and  define  their  scope  and 
functions.  The  earliest  Trust  Companies  were  incorporated  under  special 
acts. 

Trust  and  Title-Insurance  Companies.  THOMAS  LEAMING.  Lippincott's  Maga- 
zine, Philadelphia.  December,  1888.  Vol.  XLII,  pp.  886-893.  An  early 
account  of  these  companies  by  an  able  member  of  the  Philadelphia  Bar,  in 
which  their  advantages  are  conceded  and  inherent  objections  which  may 
result  from  perfunctory  management  are  noted. 

Trust  Companies.  New  York.  Published  monthly.  Devoted  to  the  interests 
of  Trust  Companies  in  the  United  States.  Established  March,  1904.  Con- 
tains much  interesting  and  valuable  matter,  and  should  be  read  by  all  who 
wish  to  keep  in  touch  with  the  latest  ideas  in  regard  to  Trust  Company 
organization  and  management. 

Trust  Companies  and  the  Clearing  House.  HORACE  WHITE.  The  Nation,  New 
York.  February  12, 1903.  Vol.  LXXVI,  p.  126.  The  relation  of  the  Trust 
Companies  and  banks ;  and  action  of  the  New  York  Clearing  House  as  to 
Trust  Company  reserves. 

Trust  Companies'  Association  of  the  State  of  New  York.  The  Banking  Law 
Journal,  New  York.  Vol.  XXI,  pp.  419-420.  An  account  of  the  organiza- 
tion and  purposes  of  this  association. 

Trust  Companies  in  the  United  States.  GEORGE  CATOR.  Johns  Hopkins 
University  Studies.  Baltimore,  1902.  Series  XV,  Nos.  5-6,  pp.  113.  A 
general  outline  of  the  subject,  historical  functions,  state  regulation,  causes 
of  development.  Appendix  contains  sketches  of  two  of  the  early  trust  com- 
panies, schedules  of  legislation,  and  tables  of  statistics.  An  important 
contribution  to  the  subject. 

The  Trust  Companies :  Is  there  Danger  in  the  System?  ALEXANDER  D.  NOYES. 
Political  Science  Quarterly.  June,  1901.  Vol.  XVI,  pp.  248-261.  Shows 
that  the  framers  of  the  New  York  banking  law  intended  to  give  "trustee" 
powers  to  the  Trust  Companies,  and  that  banking  powers  while  not  pro- 
hibited were  not  specifically  given.  The  assumption  of  banking  powers  by 
these  companies  without  the  restrictions  as  to  reserves  required  of  state  and 
national  banks  is  shown  to  be  a  danger  in  the  system.  The  writer  believes 
in  the  same  legal  requirements  as  to  reserves  for  trust  companies  as  for 
banks. 

Trust  Companies  of  the  United  States.  Compiled  by  the  Audit  Company  of  New 
York.  Published  by  the  United  States  Mortgage  &  Trust  Company,  New 


BIBLIOGRAPHY  297 

York.  Edition  of  1903,  pp.  228 ;  statements  of  912  companies.  Edition 
of  1904,  pp.  249;  statements  of  995  companies.  Edition  of  1905,  pp.  279; 
statements  of  1116  companies.  Edition  of  1906,  pp.  329;  statements  of 
1305  companies.  Edition  of  1907,  pp.  375  ;  statements  of  1479  companies. 
Contain  statements  of  condition,  date  of  commencing  business,  quotations 
for  stock,  New  York  correspondents,  officers  and  directors  of  Trust  Com- 
panies of  the  United  States. 

Trust  Companies  —  their  Organization,  Growth,  and  Management.  CLAY  HER- 
RICK.  Bankers'  Magazine,  New  York.  Vol.  LXVIII.  January,  1904  et  seq. 
A  series  of  articles  appearing  each  month. 

The  Trust  Company.  CHARLES  W.  STEVENSON.  Rand,  McNally  Bankers' 
Monthly.  Vol.  XXV,  pp.  151-156,  237-242.  Part  I :  Origin,  growth,  and 
character.  Part  2 :  Its  patrons  and  general  business. 

The  Trust  Company  Idea  and  its  Development.  ERNEST  HEATON,  B.A.,  Oxon. 
Toronto,  1904.  pp.  45.  Describes  the  origin  and  growth  of  Trustee  Com- 
panies and  official  trustees  in  different  countries,  their  functions  and  the 
legislation  aifecting  them.  With  a  list  of  Trust  Companies  in  Australia, 
Canada,  and  England. 

The  Trust  Company  of  To-day.  VIRGIL  M.  HARRIS.  The  Banking  Law  Jour- 
nal. February,  1905.  Vol.  XXII.  pp.  97-101.  A  description  based  on 
the  organization  of  Trust  Companies  in  the  Middle  West. 

The  Trust  Company  Question.  A  Paper  read  before  the  Missouri  Bankers'  Asso- 
ciation, June  9, 1892.  Revised  June,  1898.  pp.24.  BRECKENRIDGE  JONES. 
Difference  between  banks  and  trust  companies.  Reasons  of  their  existence. 
Their  powers.  Legal  safeguards.  An  early  and  still  one  of  the  best  papers 
on  the  subject,  which  has  been  followed  to  a  great  extent  by  later  writers 
and  in  trust  company  advertising  matter. 

Trust  Company  Reserves:  an  Inquiry.  GEORGE  W.  YOUNG.  The  North 
American  Review.  February,  1906.  Vol.  182.  pp.  285-297.  A  defence  of 
existing  laws  in  the  state  of  New  York,  and  contention  that  the  need  for 
additional  reserves  has  not  been  demonstrated. 

Trust  Company  Section,  American  Bankers'  Association,  Proceedings  of  the 
Annual  Meetings  of,  1896  to  date.  Proceedings  1896-1903  published  1904 
in  book  form.  pp.  381.  The  proceedings  of  these  meetings  form  a  valuable 
contribution  to  the  subject,  and  contain  many  important  papers  and  discus- 
sions by  the  ablest  Trust  Company  officers  in  this  country.  A  mine  of  facts 
and  information. 

Trust  Company  Section,  Pennsylvania  Bankers'  Association,  Proceedings  of  the 
Annual  Meetings  of,  1901  to  date.  Included  in  the  Proceedings  of  the 
Annual  Conventions  of  the  Pennsylvania  Bankers'  Association. 

Trustee  Companies.  ROBERT  C.  NESBITT.  The  Law  Society,  London.  Pro- 
ceedings of  the  twenty-ninth  provincial  meeting.  1903.  pp.  234-264.  A 
description  of  the  Trustee  Companies  of  Australia,  the  Public  Trust  Office  of 
New  Zealand,  and  the  position  in  England  of  companies  or  individuals  some- 
what analogous  to  these. 


298  BIBLIOGRAPHY 

A  Trustee's  Handbook.  AUGUSTUS  PEABODY  LORING.  Second  edition.  Boston, 
1900.  pp.  191.  States  simply  and  concisely  the  rules  which  govern  the 
management  of  trust  estates,  and  the  relationship  between  the  trustee  and 
beneficiary. 

Yearbook  of  Legislation.  Issued  annually  by  the  New  York  State  Library,  pub- 
lished by  the  New  York  State  Education  Department,  Albany.  Includes 
Annual  Digest  of  Governors'  Messages,  a  topical  digest  covering  all  the  states 
and  including  related  topics  in  the  President's  Message ;  Annual  Index  of 
Legislation,  a  minutely  classified  brief  summary  of  new  laws  passed  by  all 
states,  including  votes  on  constitutional  amendments  and  decisions  declaring 
statutes  unconstitutional ;  Annual  Review  of  Legislation,  containing  contri- 
butions from  specialists  in  all  parts  of  the  country  reviewing  governors' 
recommendations  and  laws  enacted  on  each  important  subject. 

The  Yearbook  is  a  convenient  source  of  reference  for  current  legislation 
affecting  trust  companies. 


LIST   OF   FORMS    REFERRED   TO   OR 
DESCRIBED 

[*  Form  reproduced] 

BANKING  DEPARTMENT 


Deposit  slip 

Deposit  slip  for  coupons  .     . 

Pass  book 

*Receiving  teller's  daily  settle- 
ment       

Record  of  collections   .     .     . 
Collection  maturity  index .     . 

Pay-roll  slip 

*Paying  teller's  daily  settlement 
Certification  stamp  .... 

*Charge  slip 

Stop  payment  order      .     .     . 
Record     of     stop    payment 

orders 

Signature  card 

*Record   of  deposit  accounts 

opened  

*Record   of  deposit  accounts 

closed 

individual  depositors'  ledger 
Individual  depositors' 

scratcher 

individual    depositors'    daily 

balance  and  interest  slip  . 

*Interest    table   (one   day  @ 

»#) 

Overdraft  notice 

"  Star  "  deposit  slip .... 
"Star"  charge  slip  .     .     ,     . 


45 
45 
46 

48 
49 
49 
52 
56 
56 
56 
57 

57 
62 

63 

63 
65 

68 
70 


73 
74 

74 


Check  books 74 

Vouchers  and  voucher  checks  74 

*Note 82 

*  Loan  accession  book     ...  84 
*Demand  loan  ledger  sheet     .  84 
Notification  of  change  in  in- 
terest rate 86 

interest  bill  86 


*Time  loan  ledger  sheet 


86 

87 
88 
88 
88 


Bills  receivable  ledger  sheet  . 

*Collateral  record  sheet      .    . 
Collateral  index 

*Substitution  of  collateral  slip  . 

Loan  envelope 90 

investment  ledger    ....  96 
Distribution    of   interest   ac- 
crued       97 

Letter  of  credit 99 

Letter  of  credit  guarantee      .  100 
Record    of  letters   of  credit 

issued  or  guaranteed    .     .  100 

Travellers'  check     .     .     .     .  101 

Stock  ledger  ......  104 

Stock  certificate 104 

Stock  transfer  book       .     .     .  104 

Index  of  stockholders  .     .     .  104 

Dividend  list 105 

*Dividend  check 105 

Index  of  contracts   .  106 


299 


LIST   OF  FORMS 


Order  book 106 

*Special  order  book  for  check 

books 106 

Expense  check 107 

Record  of  expenses      .     .     .  108 


Voucher  index no 

Petty  cash  receipts  book   .     .  no 

Petty  cash  payments  book     .  no 

Salary  list 1 1 1 

Salary  book in 


CORPORATE  TRUST  DEPARTMENT 


Record  of  corporation  mort- 
gages : 

*  Abstract  sheet    .     .     .     .     117 
*Record  of  bonds  received, 

certified  and  delivered     119 
*Record  of  bonds  paid,  can- 
celled, and  cremated,  or 

returned 119 

Record   of  registered   bonds 
issued  in  lieu   of   coupon 
bonds,  and  vice  versa     .     .     122 
Coupon  envelope     .     .     .     .     123 

Petty  cash  book 123 

Scratcher 123 

Statement  of  coupons  paid     .     124 
*Letter  of  advice  and  receipt 

for  paid  coupons  ....     124 
Dividend  list 124 


Dividend  check 125 

*Dividend  notice 125 

*Stock  register 129 

Stock  certificate 132 

*  Power  of  attorney  to  transfer 

stock 133 

*Power  of  substitution    .     .     .  133 
*Stock  transfer  book .     .     .     .  135 
Stock    transfer    book    (alter- 
nate form) 135 

Stock  ledger 136 

Stock  transfer  sheet      .     .     .  138 
Temporary  certificate  of  de- 
posit of  securities      .     .     .  140 
Engraved  certificate  of  deposit 

of  securities 140 

Reorganization  record  .     .     .  142 

Record  of  corporate  trusts     .  144 


INDIVIDUAL  TRUST  DEPARTMENT 


Power  of  attorney    .    . 

Index  of  securities : 
*Security  card      .     . 
*  Estate  card   .     .     . 
^Receipt  card  .... 

Maturity  index    .     .     . 

Portfolios  for  securities 
*Coupon  bond  label  .     . 
*Coupon  collection  sheet 

Coupon  envelopes    .     . 

Coupon  credit  slip  .     . 

Coupon  credit  book     . 


156 
156 
158 
159 
159 
161 
162 
164 
164 
164 


Request  for  notice  of  calls     .  165 

Record    of   interest    in    de- 
fault    166 

Application      for     mortgage 

loan 1 66 

Bond  and  mortgage      .     .     .  167 

*Mortgage  ledger 169 

Mortgage  charge  slip    0     .     .  1 70 

Mortgage  bill  and  credit  slip 

(principal) 170 

Mortgage  bill  and  credit  slip 

(interest) 170 


LIST  OF  FORMS 


301 


PAGE 

Mortgage  scratcher       .     .     .  171 
Index  of  mortgagors  and  in- 
terest payers    171 

Mortgage  location  index   .     .  172 

Mortgage  maturity  index  .     .  172 

Lease 175 

*Rent  ledger 177 

Index  of  properties  ....179 

Index  of  tenants      ....  179 

Index  of  expiration  of  leases  179 
Record  of  properties  rented 

and  vacated 1 79 

Rent  bill  and  credit  slip    .     .  179 

inspection  card 179 

Agreement  to  buy  and  sell     .  179 

Memorandum  of  settlement  .  179 

Key  envelopes     .     .     .'    .     .  181 

Order  for  repairs     .     .     .     .  181 

Bill  for  repairs 181 

Insurance   maturity  book  or 

index 182 

Insurance,  estate  index      .     .  182 

Insurance,  location  index  .     .  182 

Insurance,  line  index    .     .     .  183 

Policy  envelope 183 

Insurance  slip 183 

Insurance  expiration  notice    .  183 

Trust  credit  slip 184 

Receiving  teller's  settlement  .  185 

Disbursement  index      .     .     .  186 

Trust  charge  slip      .     .     .     .  186 

*Trust  check  186 


Daily  settlement  of  trust  dis- 
bursements   188 

Record  of  trust  securities  re- 
ceived      188 

*Record  of  trust  securities  de- 
livered      189 

Record  of  individual  trusts : 

*Abstract 190 

*Coupon  bonds    ....  190 

*Stocks 190 

*Notes  and   miscellaneous 

securities 190 

*Registered  loans      .     .     .  190 

*Mortgages 190 

*Real  estate 197 

Estate  index 197 

Will  book       198 

^Individual  trust  ledger  .     .     .  198 

Individual  trust  scratcher  .     .  199 
Individual  trust  daily  balance 

and  interest  slip  ....  200 
Trust  general  ledger  .  .  .  201 
Trust  general  cash  book  .  .  203 
Trust  general  journal  .  .  .  203 
Trust  comparative  daily  bal- 
ance sheet 203 

Trust    comparative    monthly 

balance  sheet 204 

Monthly    statement  of   trust 

accounts  opened  and  closed  204 
Index  of  trust  balances  for 

investment 207 


SAFE  DEPOSIT  DEPARTMENT 


*Receipt  for  safe  rent     .     .    .  213 
*Receipt     and     identification 

card  —  safe 213 

*Appointment   and  identifica- 
tion of  deputy      .     .     .     .  216 
Rent  ledger  card      .     .     .     .  217 


Bill  for  safe  rent 217 

Credit  slip  for  safe  rent     .     .     217 
Charge    slip     for    refunding 
rent 218 

*Corporate    resolution    giving 


access  to  an  individual 


218 


302 


LIST  OF  FORMS 


"Corporate  certificate  of  elec- 
tion of  officers      .     .     .     .     219 
Certificate  of  deposit  of  valu- 
ables    219 

*Receipt     and     identification 

card  —  valuables  ....     220 

Ledger  card 222 

Bill  for  deposit  of  valuables  .     222 


Credit  slip  for  payments   for 

deposit  of  valuables   .     .     .  222 

Tag 222 

Delivery  order  for  valuables  .  222 

Receipt  for  valuables    .     .     .  222 

Record  of  visitors    .     .     .     .  222 

*Cash  and  record  book  .     .     .  224 

*Comparative  monthly  report .  224 


SAVINGS  FUND  DEPARTMENT 


*Signature  card 226 

Savings  deposit  book    .     .     .  226 

Savings  deposit  slip .     .     .     .  226 

*  Withdrawal  notice    .    .     .    .  227 


*Withdrawal  slip 227 

"Ledger  card 229 

Scratcher 229 


GENERAL  ACCOUNTING 


General  ledger 234 

General  cash  book  ....  240 

General  journal 240 

Daily  trial  balance   ....  241 
*Comparative     daily     balance 

sheet 241 


Comparative  monthly  balance 

sheet 241 

Monthly  balance  sheet .     .     .  242 

Daily  cash  report     ....  242 


CORRESPONDENCE  OR  MAIL  ROOM 


Record  of  registered  mail      .     250 
Vertical  letter  file    .     .     .    .     251 


Finding  index 251 

Dummy  sheet 254 


OFFICE  BUILDING 
Record  of  persons  entering  and  leaving  building 


260 


PURCHASE  AND  CARE  OF  SUPPLIES 


"Inventory  and  schedule  of  an- 
nual order  of  supplies    .     .  263 
Record  of  supplies  received  .  265 
Requisition  for  supplies     .     .  265 


Stock  ledger  card     .     .     .     .     265 

Sample  book 266 

Index  of  forms   .  266 


INDEX 


Abstract  sheet —'corporate  trusts,  145;  cor- 
poration mortgages,  117-119;  individual 
trusts,  189,  190;  registrar,  128;  transfer 
agent,  135. 

Access  —  to  building,  258,  260;  to  safe  de- 
posit box,  211, 214-219;  to  trust  securities, 

153. 

Accession  book  —  collection  items,  49;  de- 
posit accounts,  63;  loans,  82,  84;  trust 
securities,  153,  158,  179,  188,  197. 

Accession  number,  trust  accounts,  144,  197, 
198,  254. 

Accident  liability  insurance,  181. 

Accountant,  examination  by  certified  public, 
247. 

Accounting  —  to  beneficiaries,  198,  200;  to 
court,  150,  152,  198,  200, 

Accounts  —  of  assignee,  144;  Boston  system, 
64;  corporate  trust,  144;  court,  73;  de- 
posit, closed,  63 ;  deposit,  new,  62 ;  dupli- 
cate systems,  64 ;  general  ledger,  235-240 ; 
inactive,  73 ;  individual  trust  department, 
196-200 ;  receivable,  236 ;  of  receiver,  144. 

Accrued  —  commissions,  208;  interest  on  in- 
vestments, 96-97;  interest  payable,  238, 
240 ;  interest  receivable,  236. 

Actuary,  29. 

Addressing  machine,  125,  250. 

Adjudication  of  court,  150. 

Administrator,  8,  150,  205. 

Advantages  of  trust  company  as  trustee,  4. 

Advertising,  99,  266-267;  item  in  expense 
account,  108 ;  real  estate,  174. 

Agent,  10,  152;  commissions  as,  146,  208; 
for  corporations,  144;  fiscal,  7,  39,  122- 
126;  for  real  estate,  173;  transfer,  7,  40, 
129. 

Agreement  for  sale  of  real  estate,  179. 

Annuities,  n,  186,  230. 

Applications  —  for  mortgages,  166,  253;  for 
positions,  253. 

Appointment  and  identification  of  deputy, 
card,  216,  221. 

Appointments,  made  by  President,  34. 

Assessments  on  securities  deposited,  142. 

Assets — general  ledger,  235;  separation  of 
trust  from  company's,  4,  147-148. 

Assignee,  8,  10,  142-144,  146,  152. 

Assignment  —  deed  of,  143  ;  of  mortgage,  167. 

Attorney,  9,  152,  205,  208 ;  power  of,  82,  133, 
152. 


Audit,  243-248;  by  court,  150,  152,  188;  of 
\fi  depositors'  ledger,  67;  of  rent  ledger,  177. 
Auditor,  233-234. 

Australia  —  land  transfer  acts,  176;  trustee 
companies  in,  5. 

Balance  and  interest  slip  —  individual  de- 
positors', 68-70 ;  individual  trusts,  200,  207. 

Balance  sheet,  144,  235;  comparative,  203, 
241;  expenses  included  in  daily,  109; 
monthly,  242;  trust  general  ledger,  202. 

Balance,  trial,  234,  241 ;  individual  trusts,  200; 
savings  department,  229. 

Balances  for  investment,  index  of,  207. 

Bank  —  of  England,  92 ;  exchanges,  54 ;  state- 
ments, 43. 

Banking  —  commissioner  of,  243;  depart- 
ment, 43-112;  functions  of  trust  compa- 
nies, 6;  —  house,  furniture,  and  fixtures, 
general  ledger  account,  236 ;  by  mail,  50. 

Banks  and  bankers,  due  to,  general  ledger 
account,  237. 

Beneficiaries  of  trust  estates,  151 ;  accounting 
to,  198,  200 ;  index  of,  254. 

Bibliography,  291. 

Bill  —  deposit  of  valuables,  222;  expenses, 
107;  interest  on  loans,  86;  mortgage  in- 
terest and  principal,  168,  170,  171 ;  rent, 
175,  179;  rent  of  safe,  217;  repairs,  181, 
188. 

Bills  receivable,  78;  general  ledger  account, 
235 ;  ledger  sheet,  87. 

Board  of  Directors,  23-27 ;  chairman  of,  28 ; 
minutes,  38. 

Boiler  insurance,  181. 

Bond  —  department,  98,  206;  issue  secured 
by  mortgage,  236,  238;  and  mortgage, 
form  of,  167. 

Bonds  —  cancellation  of,  117;  care  of,  153- 
155, 159 ;  certified  by  trustee,  115  ;  coupon, 
arrangement  of,  160;  coupon  and  regis- 
tered, interchangeable,  122;  cremation  of, 
117;  delivered  by  trustee,  115;  due  or  called, 
50,  165;  fidelity,  231,  256;  general  ledger, 
account,  236;  index  of  coupon,  155-156; 
index  of  registered,  157 ;  label  for  coupon, 
161 ;  mortgage  to  secure,  113,  236 ;  record 
of,  paid,  cancelled,  and  cremated  or  re- 
turned, 119,  121 ;  record  of,  received,  cer- 
tified, and  delivered,  119,  120;  registered 
153 ;  required  of  trustees,  etc.,  2,  149,  151 ; 


303 


304 


INDEX 


subject  to  redemption,  124;    transfer  of 

registered,  138. 

Book — coupon  bonds,  97, 160;  value  of  build- 
ing and  fixtures,  261. 
Bookkeeper  —  general  ledger,  240;  individual 

depositors,  63 ;  savings  department,  227 ; 

trust  department,  184. 
Boston  —  clearing  house,  59 ;  system  of  ledger 

accounts,  64. 
Branch  offices,  19. 
Brief  of  title,  167. 
Building,    259-261;     maintenance    of,    109; 

record  of  persons  entering  and  leaving, 

260. 

Burglary  insurance,  181. 
Burial  lot  funds,  176. 
By-laws,  19,  39. 

Call  loans,  78. 

Called  bonds,  165 ;  requests  for  notice  of,  165. 

Cambist,  104. 

Cancellation  of  bonds  by  trustee,  117. 

Cancelled  —  certificates,  135;  coupons,  letter 
of  advice  and  receipt  for,  124. 

Capital  stock,  19 ;  general  ledger  account,  239 ; 
market  value,  20 ;  minimum  required,  15- 
18. 

Car  trust,  116. 

Card  index,  see  Index. 

Cash— errors  in  53,  239;  general  ledger  ac- 
count, 235;  petty,  for  payment  of  cou- 
pons, 123;  petty,  payments,  no;  petty, 
receipts,  no,  240;  receipts,  safe  deposit 
department,  213,  224;  report,  242;  trust 
general  ledger,  171,  201 ;  uninvested  trust, 
148,  185,  188,  199,  200,  201,  207. 

Cashbook  —  corporate  trusts,  144;  general, 
240;  individual  trusts,  189;  petty  payments, 
no;  petty  receipts,  no;  and  record,  safe 
deposit  department,  224;  trust  general, 
171,  203. 

Certificates' — of  appointment  of  executor,  150 ; 
cancelled,  135;  of  deposit,  47,  55,  237; 
of  deposit  of  securities,  140-142;  of  de- 
posit of  valuables,  219,  224 ;  of  "  no  de- 
fence" or  "no  set-off,"  167;  receivers', 
143;  stock,  129,  132. 

Certification  —  of  bonds,  115, 145 ;  stamp,  56. 

Certified  checks,  56 ;  general  ledger  account, 

„   238- 

Certified  public  accountant,  247. 

Charge  slips,  56-57;    certified    checks,  56; 

mortgages  purchased,  170;   safe  deposit 

department,  218,  224;  "star"  entries,  74; 

trust  department,  186, 199. 
Charities,  trusts  for,  151. 
Charter,  14-18. 
Check  books,  74,  106. 
Checks  — cancelled,  68,  71,  73;   certified,  56, 

238 ;  clearing  trust  company,  57-61 ;  div- 


idend, 105,  125;  for  expenses  payable, 
107;  indorsement  of,  54;  lost,  57;  or- 
der book  for,  106;  payment  of,  54; 
posted,  67;  for  repairs,  181 ;  salary,  in; 
travellers',  101 ;  trust,  186,  187. 

Chicago  Clearing  House,  57. 

Cleaners,  259. 

Clearing  House  —  Boston,  59;  Chicago,  57; 
New  York,  57;  Philadelphia,  59;  Pitts- 
burg,  59;  certificates,  77. 

Clearing  trust  company  checks,  57-61. 

Clerical  force,  256-258. 

Closed  —  deposit  accounts,  63 ;  corporate 
trust  accounts,  122;  individual  trust  ac- 
counts, 197,  198. 

Coal  trust,  116. 

Co-assignee,  143. 

Co-executor,  149,  207. 

Coin  counting  devices,  52. 

Collateral,  78-82;  arrangement  of,  90; 
changes  slip,  252;  index,  82,  88;  inheri- 
tance tax,  149;  mortgage  bonds  issued  by 
trust  company,  99 ;  power  of  attorney  to 
transfer,  82;  record,  82,  88,  89;  substitu- 
tion of,  88,  91,  116;  trusts,  116. 

Collection  —  items  deposited  for,  48 ;  maturity 
index,  49;  record,  49;  sheet,  coupons, 
162,  163;  sheet,  dividends,  165;  sheet, 
registered  interest,  165 ;  window,  45. 

Collector,  rent,  175. 

Commercial  paper  —  discounting,  78,  88 ; 
general  ledger  account,  235 ;  ledger,  87. 

Commissioner  of  banking,  243. 

Commissions,  186;  on  corporate  trusts,  145- 
146;  general  ledger  account,  239;  indi- 
vidual trusts,  198-199,  207-208 ;  on  letters 
of  credit,  101 ;  trust  general  ledger,  201. 

Committee — of  board  of  directors,  25;  of 
estate,  9,  152. 

Company's  general  ledger,  234-243. 

Comparative  —  balance  sheets,  241;  monthly 
report,  safe  deposit  department,  223,  224 ; 
trust  department,  balance  sheet,  203,  204. 

Competitive  bids  for  supplies,  263. 

Comptroller  of  currency,  243. 

Conservator,  9, 152. 

Contracts  —  deposit  of  valuables,  220 ;  index 
of,  106;  rent  of  safe,  214;  for  supplies, 
265. 

Controller,  233-234. 

Conveyancing,  167,  231, 176. 
Copier,  roller,  251. 

Corporate  —  resolution  giving  access  to  safe, 
218 ;  certificate  of  election  of  officer, 
219. 

Corporate  trust  department,  113-146;  man- 
ager of,  39. 

Corporate  trusts,  6-8;  accounts,  144-145; 
closed,  122;  ledger,  145;  record  of,  117, 
122,  128,  135,  144-145- 


INDEX 


305 


Corporation  mortgage,  113;  in  default,  114, 

140;  record  of,  117-122. 
Correspondence,  38,  249-256 ;  real  estate,  176, 

254- 

Co-trustee,  151,  207. 

Counsel,  for  trust  estates,  148. 

Coupon  bonds  —  arrangement  of,  160-162 ; 
due  or  called,  165 ;  index,  155-156 ;  label, 
161 ;  record  individual  trusts,  190,  191 ; 
record  of,  issued  in  lieu  of  registered,  122 ; 
registered,  124. 

Coupon  mortgage  loan,  171. 

Coupons,  162;  collection  of,  184;  collection 
sheet,  162,  163 ;  credit  book,  164 ;  cutting, 
154,  159,  162,  164;  credit  slip,  164;  de- 
posit of,  45, 49 ;  in  default,  166 ;  envelopes, 
123,  164;  letter  of  advice  and  receipt  for 
paid,  124;  paid  by  fiscal  agent,  122; 
scratcher  for  paid,  123 ;  statement  of  paid, 
124. 

Court  —  accounting  to,  150-152, 198, 200 ;  ap- 
pointment of  receiver  by,  143 ;  fixes  com- 
pensation, 207;  probate,  surrogate,  or 
orphans',  149. 

Credit  accounts,  general  ledger,  235. 

Credit  book  —  coupon,  164;  interest,  165; 
dividend,  166. 

Credit,  letters  of,  99 ;  guarantee,  100 ;  record 
of,  issued  or  guaranteed,  100. 

Credit  slips  —  coupon,  164;  deposit  of  valua- 
bles, 222,  224;  dividend,  165;  interest, 
165 ;  mortgage  interest  and  principal,  170 ; 
rent,  177,  179 ;  rent  of  safe,  217,  224 ;  trust, 
184,  199. 

Cremation  of  bonds  by  trustee,  117. 

Curator,  9, 152. 

Custodian,  10,  153. 

Daily  balance  and  interest  slip  —  individual 
depositors',  68-70;  individual  trusts,  200, 
207. 

Debit  —  accounts,  general  ledger,  235;  bal- 
ances, trust  department,  186. 

Debts,  preferred,  149. 

Deed  —  of  assignment,  143;    trustee  under, 

IS*- 

Default,  record  of  interest  in,  166. 
Delivered,  record  of  securities,  159, 179,  189, 

197- 

Delivery  —  of  bonds  by  trustee,  115 ;  "  good," 
82,  132,  133 ;  order  for  valuables,  222 ; 
rules  of  New  York  Stock  Exchange  for, 
287 ;  of  trust  securities,  154,  234. 

Demand  loans,  77 ;  form  of  note,  82, 83 ;  gen- 
eral ledger  account,  235;  interest  on,  84, 
86;  ledger,  84,  85;  notice  of  change  of 
rate,  93. 

Deposit — book,  savings  department,  226 ;  cer- 
tificates of,  general  ledger  account,  237; 
certificate  of,  of  securities,  140-142;  cer- 


tificate of,  of  valuables,  219-222,  224 ;   of 
securities,  212,  213 ;  of  valuables,  212,  219- 

222. 

Deposit  slips,  45,  46 ;  for  coupons,  45 ;  filed, 
73;  posted,  67;  savings  department,  226, 
229 ;  "  star  "  entries,  74. 

Depositary,  10,  153 ;  under  plan  of  reorgani- 
zation, 8, 140 ;  commissions,  146. 

Depositors,  individual  —  accounts  opened, 
62;  bookkeeper,  63;  daily  balance  and 
interest  slip,  69  ;  index,  62  ;  interest 
allowed,  68-72 ;  ledger,  63-68 ;  record  of, 
accounts  opened,  63 ;  record  of,  accounts 
closed,  63;  scratcher,  65,  68;  trial  bal- 
ances, 67. 

Depository,  2. 

Deposits  —  care  of,  61-74 1  *°r  collection,  48 ; 
coupon,  45 ;  interest  allowed  on,  43 ;  made 
without  pass-book,  46;  by  mail,  50;  re- 
ceipt of,  45 ;  savings,  237 ;  special,  237 ; 
subject  to  check,  237,  238 ;  of  trust  com- 
panies with  banks,  54. 

Depreciation  of  plant,  261. 

Deputy,  appointment  and  identification  of, 
216,  221. 

Directors,  23-27 ;  chairman  of  board  of,  28 ; 
examination  by,  245-248 ;  item  in  expense 
account,  108 ;  loans  to,  79. 

Disbursements  of  trust  funds,  185-188 ;  index 
of,  186. 

Discounting  commercial  paper,  78,  87. 

Distribution  —  of  expenses,  107-1 10 ;  of  inter- 
est accrued,  97. 

District  of  Columbia,  trust  companies  in,  13, 
232,  269. 

Dividend — check,  105, 125 ;  collection  of,  165 ; 
declared,  137 ;  general  ledger  account,  238 ; 
list,  105, 124, 137 ;  notice,  105, 125 ;  orders, 
50,  104 ;  paid  by  fiscal  agent,  124 ;  record 
in  security  index,  157 ;  on  trust  company's 
stock,  104. 

Domestic  exchange,  101. 

Double  liability  of  stockholders,  23. 

Drafts  —  foreign,  102;  received  for  collection, 
48. 

Due  to  banks  and  bankers,  general  ledger 
account,  237. 

"  Dummy  "  sheet,  trust  correspondence,  254. 

Duplicate  systems  of  ledger  accounts,  64. 

Duplicating  systems,  250. 

Election  of  officers,  notice  to  safe  deposit  de- 
partment, 219. 

Employees,  256-259. 

England,  Bank  of,  92. 

Envelopes  —  for  coupons,  123, 164 ;  for  insur- 
ance policies,  183;  for  keys,  181;  loan, 
90;  salary,  in. 

Equipment,  maintenance  of,  109. 

Errors  in  cash,  53,  239. 


3o6 


INDEX 


Escrow,  10,  141,  153. 

Estate  index,  197 ;  insurance  policies,  182. 

Examinations,  234,  243-248. 

Examiners,  state  bank,  243-244. 

Exchange  —  against  merchandise,  103;  arbi- 
tration of,  103 ;  domestic,  101 ;  foreign, 
102. 

Exchanges — bank,  54 ;  clearing  house,  57-61. 

Executor,  8,  148-151 ;  commissions,  207-208 ; 
investments,  205. 

Expense  account,  106-110. 

Expenses  —  check,  107;  distribution  of,  108; 
general  ledger  account,  109,  no,  238,  240; 
index  of,  no;  legal,  108;  miscellaneous, 
109 ;  payable,  general  ledger  account,  108, 
no,  238,  240;  record  of,  107-110. 

Expiration  —  notice,  collateral  insurance,  183 ; 
of  leases,  index,  179. 

Express  company,  agreement  to  transport 
valuables,  222. 

Farmers'  Loan  &  Trust  Co.,  N.  Y.,  2. 

Fidelity  insurance,  5,  n,  230,  256. 

Filing  system,  vertical,  251-255. 

Finding  index,  correspondence,  251. 

Fire    insurance,     181-183;     collateral    with 

mortgage,  168,  172,  181-183. 
Fiscal  agent,  7,  39,  122-126;    commissions, 

145- 

Flat  coupon  bonds,  97,  160. 
Foreclosure  of  mortgage,  169. 
Foreign  exchange,  102. 
Forms  and  equipment,  index  of,  266. 

General  ledger,  95,  99,  108,  109,  no,  234-243; 
corporate  trust,  144 ;  trust,  188, 199, 201-204. 

General  officers,  28-42,  108,  206,  233. 

Girard  Trust  Company,  Philadelphia,  2. 

Good  delivery,  82,  132,  133. 

Government  regulation,  11-13. 

Great  Britain,  Public  Trustee  Act,  13. 

Ground  rents,  172,  197;  general  ledger  ac- 
count, 236. 

Guarantee  of  letter  of  credit,  100. 

Guardian,  9, 152 ;  investments,  205. 

Housekeeper,  259,  261,  262. 

Identification  card  —  depositor  of  valuables, 
221,  deputy,  221;  safe  renter,  213,  215, 
deputy,  216. 

Illinois,  banking  laws,  18, 43. 

Illinois  Trust  and  Savings  Bank,  225. 

Inactive  accounts,  73. 

Income  —  distinction  between  principal  and, 
96,  185;  general  ledger,  235;  individual 
trust  ledger,  198  ;  trust  general  ledger,  201. 

Index  —  balances  for  investment,  207 ;  bene- 
ficiaries, 254 ;  closed  deposit  accounts,  63 ; 
collateral,  82,  88;  collection  maturity,  49; 


contracts  outstanding,  106;  correspond- 
ents, 251 ;  depositors  of  valuables,  220-221, 
224 ;  forms  and  equipment,  266 ;  individual 
depositors,  62;  insurance  policies,  matu- 
rity, estate,  location,  and  company,  182, 
183 ;  leases  maturing,  179 ;  mortgage  cor- 
respondence, 255 ;  mortgage  interest  pay- 
ers, 170,  171;  mortgage  location,  172; 
mortgage  maturity,  172;  mortgagors  and 
interest  payers,  171;  real  estate  corre- 
spondence, 254;  real  estate  location,  179; 
safe  renters,  213-215,  224;  safes  rented, 
217;  securities,  155-159,  162,  165;  securi- 
ties maturing,  159;  securities  for  sale,  99; 
signatures,  depositors,  63 ;  signatures,  sav- 
ings department,  225,  226;  stockholders, 
104,  126;  tenants,  179;  trust  disburse- 
ments, 186;  trust  estates,  197,  254;  trust 
securities,  155-159;  valuables  deposited, 
220,  221 ;  voucher,  no. 

Individual  depositors  —  accounts  opened,  62 ; 
bookkeeper,  63 ;  daily  balance  and  inter- 
est slip,  69;  index,  63;  interest  allowed, 
68-72 ;  ledger,  63-68 ;  record  of  accounts 
opened,  63;  record  of  accounts  closed, 
63 ;  scratcher,  65,  68 ;  trial  balances,  67. 

Individual  trusts,  8-n  ;  daily  balance  and  in- 
terest slip,  200,  207;  department,  147- 
208 ;  ledger,  179,  198-200 ;  manager  of 
department,  40;  record  of,  153,  188-198; 
scratcher,  199,  200  ;  trial  balances,  200. 

Indorsement  of  checks,  54 ;  by  trust  depart- 
ment, 185. 

Inspection  card,  real  estate,  179,  180. 

Inspectors,  real  estate,  175. 

Insurance,  5,  11;  clerk,  182;  collateral  with 
mortgage,  168,  172,  181-183;  expiration 
notice,  183 ;  life,  fidelity  and  title,  230-232 ; 
on  real  estate,  181 ;  records,  182-183  >  risks 
not  compatible  with  trust  business,  6,  12, 
232 ;  slip  or  memorandum,  183. 

Interest —  accrued  payable,  238,  240;  accrued 
receivable,  96,  236;  and  balance  slip,  69, 
200,  207 ;  bill,  86 ;  collection  of,  165 ;  dis- 
tribution of  accrued,  97 ;  in  default,  record 
of,  166;  on  loans,  78,  84,  86,  92;  on  mort- 
gages, 168 ;  orders  deposited,  50;  paid 
depositors,  43,  68-72,  238,  240;  paid  by 
fiscal  agent,  126;  rate,  notice  of  change 
in,  86,  93;  receipts,  236,  239;  record  in 
security  index,  157 ;  on  savings  accounts, 
229;  table  (i  day  @  2%),  72. 

Intestate  laws,  150. 

Inventory,  149,  152 ;  and  schedule  of  annual 
order  for  supplies,  263,  264. 

Investment  —  index  of  balances  for,  207; 
ledger,  96. 

Investments  —  assigned  by  trust  officer,  41; 
corporate  trusts,  145 ;  individual  trust 
ledger,  199;  interest  accrued  on,  96; 


INDEX 


307 


"  legal,"  93,  205 ;   made  by  President  and 
finance  committee,  34 ;  for  trust  accounts, 
204-207 ;   of  trust  company,  93-98 ;   trust 
general  ledger,  201. 
Irredeemable  ground  rent,  172. 

Joint  access,  to  safe  deposit  box,  an,  216. 
Journal — general,  240 ;  corporate  trusts,  144 ; 

entries,  no,  236,  238,  239 ;  trust  general, 

203. 

Keys  —  envelopes  for,  181;  for  safe  deposit 
boxes,  217. 

Label,  coupon  bond,  161. 

Land  transfer,  Torrens  Act,  176. 

Leases,  175 ;  index  of  expiration  of,  179. 

Ledger  —  audit  of  depositors',  67;  authority 
for  entries  in  depositors',  73 ;  bills  receiv- 
able, 87, 88 ;  bond,  138 ;  commercial  paper, 
87, 88 ;  corporate  trust,  145 ;  corporate  trust, 
general,  144;  demand  loan,  84,  85;  de- 
posit of  valuables,  222 ;  general,  company's, 
108,  109,  no,  234-243;  individual  de- 
positors', 63-68 ;  individual  trust,  179,  198- 
200 ;  investment,  96 ;  loan,  82,  84-87 ; 
mortgage,  169;  rent,  177,  178;  rent  of 
safes,  217 ;  savings  department,  227-229 ; 
securities  for  sale,  99 ;  stock,  104, 124, 137 ; 
supplies,  265;  temporary  investment,  96; 
time  loan,  86,  87 ;  trust  general,  188,  199, 
201-204. 

Legacies,  149,  188. 

Letters  —  copied,  filed,  etc.,  249-256 ;  of  credit, 
99-101 ;  testamentary,  149. 

Liabilities,  general  ledger,  235. 

Liability  —  of  safe  deposit  company,  an,  217 ; 
of  stockholders,  23 ;  of  trust  company,  154; 
of  trustee  under  corporation  mortgage,  6, 

"3- 

Life  insurance,  5,  ir,  230. 

Lighting  and  heating,  expense  account,  108. 

"  Line  "  index,  insurance  policies,  183. 

Listing  stocks  or  bonds,  requirements  New 
York  Stock  Exchange,  279. 

Loans,  77-92 ;  accession  book,  82,  84 ;  called, 
37,  78 ;  clerk,  77,  82 ;  demand,  77,  82-86, 
235 ;  envelopes  for,  90 ;  general  ledger 
accounts,  235;  ledger,  82,  84-87;  margin 
on,  8 1,  90;  to  officers  and  directors,  79; 
rate  of  interest  on,  78,  84,  92;  time,  86,  87, 
92,  235  ;  treasurer  responsible  for,  36. 

Location  index  —  insurance  policies,  182; 
mortgages,  172;  real  estate,  179. 

Loss,  profit  and,  239,  240. 

Luncheon  room,  261-262;  itemized  expenses, 
109. 

Mail  —  deposits  by,  50,  252;  room,  249- 
256. 


Maintenance  —  of  building,  109 ;  of  equip- 
ment, 109. 

Manager  —  of  Corporate  Trust  Department, 
39;  of  Individual  Trust  Department,  40; 
of  underwriting  syndicates,  139,  145. 

Margin,  on  collateral  loans,  81, 90;  ten-point 
rule,  81. 

Marriage  settlement,  deed  of,  151. 

Maryland,  ground  rent  in,  172. 

Massachusetts  —  act  of  1904,  incorporation 
and  reserve  fund  of  trust  companies,  16; 
regulation  of  trust  companies  in,  12,  39. 

Maturity  —  of  mortgage  loans,  168;  notice, 
time  loans  and  commercial  paper,  86. 

Maturity  index  —  collection  items,  49 ;  insur- 
ance policies,  182  ;  leases,  179  ;  mort- 
gages, 172;  securities,  159. 

Messengers  and  watchmen,  258  ;  expense 
account,  108. 

Minutes,  of  Board  of  Directors,  38. 

Miscellaneous  securities  —  arrangement  of, 
159 ;  index  of,  157 ;  record  of  individual 
trusts,  190,  193. 

Money  —  new,  52 ;  rate,  92. 

Mortgage,  166-173 1  abstract  of  corporation, 
117  ;  application  for,  166,  253  ;  assign- 
ment of,  167 ;  bills,  168,  170 ;  charge  slip, 
170  ;  correspondence,  255  ;  credit  slip, 
170;  foreclosure  of,  169;  general  ledger 
account,  236 ;  held  for  trust  estates,  168 ; 
index  of  payers,  171 ;  insurance,  collateral 
with,  172, 181-183 ;  interest  on,  168 ;  ledger, 
169;  location  index,  172;  maturity  index, 
172;  record  of  corporation,  117-122,  145; 
record  of  individual  trusts,  190,  195 ;  re- 
corded, 167;  satisfaction  of,  by  trustee, 
117;  scratcher,  171 ;  to  secure  bond  issue, 
113,  236;  settlement,  167,  170. 

Mortgagors,  index  of,  171. 

Mutual  insurance  companies,  21,  230. 

National  Banking  Act,  23,  232,  269-278. 

New  accounts  —  depositors',  62 ;  savings  de- 
partment, 226. 

New  York  —  bank  statement,  43;  clearing 
house,  57 ;  general  trust  company  law,  14 ; 
money  centre  of  United  States,  92 ;  stock 
exchange  rules,  127,  132,  279-292. 

New  York  Life  Insurance  and  Trust  Com- 
pany, 2. 

New  Zealand  —  Public  Trust  Office,  13; 
trustee  companies  in,  5. 

"  No  defence,"  or  "  no  set-off,"  certificate  of, 
167. 

"  No  protest,"  50. 

Notes  —  arrangement  of,  90;  collection  of, 
166;  form  of,  82,  83;  and  miscellaneous 
securities,  individual  trusts,  157,  190,  193; 
received  for  collection,  48. 

Notice  —  change  of  interest  rate,  86, 93 ;  elec- 


308  INDEX 


tion  of  officers,  219 ;  expiration  of  collat- 
eral insurance,  183;  withdrawal,  savings 
department,  227. 
Numerical  filing  system,  251. 

Office  building,  259-261. 
Officers,  28-42 ;  general,  28-42, 108,  206,  233 ; 
loans  to,  79 ;  positions  combined,  28,  35, 

37,  38,  41- 
Order  book  —  for  repairs  to  real  estate,  181; 

special  for  check  books,  106 ;  for  supplies, 

106,  265. 
Organizing  a  trust  company — under  special 

acts,  14;   under  general   laws,  14-18;   in 

Illinois,  18;  in  Massachusetts,  16;  in  New 

York,  14 ;  in  Pennsylvania,  15. 
Orphans'  court,  149. 
Overdraft  notice,  73. 

Pass  book,  45,  46,  48,  63,  64;  deposits  made 
without,  46 ;  settled,  71,  73. 

Pay  roll,  in;  slip,  52. 

Payers,  mortgage  interest,  index  of,  171. 

Paying  teller,  51-57,  213,  218 ;  savings  depart- 
ment, 229 ;  settlement  book,  55,  56 ;  trust 
department,  185-188. 

Payments  book,  petty  cash,  no. 

Pennsylvania  —  executor  and  trustee  in,  208 ; 
general  corporation  law,  15;  ground  rent 
in,  172 ;  title  insurance  and  trust  business 
combined  in,  232. 

Pennsylvania  Company  for  Insurances  on 
Lives  and  Granting  Annuities,  2. 

Pensions,  258. 

Perpetuity,  trusts  in,  151. 

Petty  cash  —  for  payment  of  coupons,  123 ; 
payments,  no;  receipts,  no,  240. 

Philadelphia  —  clearing  house,  59;  ground 
rents,  236. 

Phonograph,  used  for  dictation,  250. 

Pittsburg,  clearing  house,  59. 

Plant,  depreciation  of,  261. 

Plate  glass  insurance,  181. 

Portfolios,  for  securities,  90,  97,  159,  160, 161. 

Postage  stamps,  general  ledger  account,  236. 

Postings  —  general  ledger,  240;  individual 
depositors'  ledger,  65-68 ;  savings  depart- 
ment ledger,  229 ;  stock  ledger,  137 ;  trust 
ledger,  199. 

Power  of  attorney — general  or  special,  9, 152 ; 
to  transfer  collaterals,  82;  to  transfer  se- 
curities, 126;  to  transfer  stock,  133. 

Power  —  of  sale,  173;  of  substitution,  133. 

Premium,  charged  off,  96,  97,  206. 

President,  29,  31-35. 

Principal  —  accounts,  general  ledger,  235 ;  dis- 
tinction between  income  and,  96,  185 ;  in- 
dividual trust  ledger,  199;  paid  by  fiscal 
agent,  126 ;  trust  general  ledger,  201. 

Probate  court,  149. 


Profit  and  loss,  general  ledger  account,  201, 
239,  240. 

Profits,  undivided,  general  ledger  account, 
239,  240. 

Promotions,  257. 

Properties  —  index  of,  179;  rented  and  va- 
cated, record  of,  179. 

Protest,  notes,  etc.,  50. 

Proxy,  voting  by,  22. 

Public  Accountant,  examination  by,  247-248. 

Purchase  —  ledger,  no;— money  mortgage, 
167;  of  supplies,  262-266. 

Quotations,  stock,  80. 

Rate  of  interest  on  loans,  78,  84,  92 ;  notice 
of  change  of,  86,  93. 

Real  estate,  173-181 ;  correspondence,  254 ; 
department,  173 ;  general  ledger  account, 
236;  held  by  trust  company,  94,  259;  in- 
spection card,  179,  180;  insurance  on, 
181-183;  officer,  173;  records,  175;  reso- 
lutions authorizing  sale  of,  39 ;  sheet,  rec- 
ord of  individual  trusts,  196,  197. 

Rebates,  rent  of  safe,  218,  224. 

Receipt — and  identification  card,  rent  of  safe, 
213,215;  and  identification  card,  deposit 
of  valuables,  220,  221 ;  for  letters  borrowed 
from  files,  249 ;  for  pass  book  and  can- 
celled checks,  71 ;  for  rent  of  safe,  213, 
214,  224 ;  of  savings  deposits,  226 ;  for  se- 
curities delivered,  154,  157,  158 ;  for  taxes, 
168,  169 ;  temporary,  for  securities  depos- 
ited, 140;  of  trust  funds,  184-185,  234; 
for  valuables,  222. 

Receipts  book,  petty  cash,  no. 

Received,  record  of  securities,  153,  158,  179, 
188,  197. 

Receiver,  8,  10, 143, 152;  accounts,  144;  com- 
missions, 146. 

Receivers'  certificates,  143. 

Receiving  teller,  44-51,  213,  218 ;  daily  settle- 
ment, 47,  48 ;  savings  department,  226 ; 
trust  department,  164,  170,  184-185. 

Record  —  of  bonds  paid,  cancelled,  cremated, 
or  returned,  119,  121;  of  bonds  received, 
certified,  and  delivered,  119,  120;  of  col- 
lateral, 82,  88,  89;  of  collections,  49;  of 
corporate  trusts,  117,  122,  128,  135,  144- 
145;  of  corporation  mortgages,  117-122, 
145 ;  of  deposit  accounts  closed,  63 ;  of 
deposit  accounts  opened,  63 ;  of  expenses, 
107,  no;  of  individual  trusts,  153,  188- 
198 ;  of  interest  in  default,  166 ;  of  letters 
of  credit  issued  or  guaranteed,  100;  of 
persons  entering  safe  deposit  department, 
210,  222;  of  properties  rented  and  va- 
cated, 179;  of  registered  mail,  250;  of 
safes  rented  and  surrendered,  224 ;  of  se- 
curities delivered,  159,  179,  189,  194;  of 


INDEX 


309 


securities  received,  153,  158,  179,  188,  197 ; 
of  stop  payment  orders,  57;  of  supplies 
received,  265 ;  of  valuables  deposited  and 
withdrawn,  224. 

Recording  —  of  mortgage,  167 ;  of  title  to  real 
estate,  176. 

Redeemable  ground  rent,  172. 

Redemption  —  bonds  subject  to,  124;  provi- 
sions, 115,  165. 

Register,  .stock,  129, 130. 

Registered  bonds  —  care  of,  159;  index  of, 
155-157 ;  record  of  individual  trusts,  190, 
194 ;  record  of,  issued  in  lieu  of  coupon, 
122;  transfer  of,  138. 

Registered  mail,  record  of,  250. 

Registrar,  7,  40,  127-129 ;  commissions,  145 ; 
contract  with,  127. 

Registration  —  of  real  estate  transfers,  176, 
231 ;  of  trust  securities,  153. 

Regulations,  of  safe  deposit  department,  214, 

220. 

Release,  188 ;  deposit  of  valuables,  221. 

Remittance  clerk,  185,  254. 

Renewals,  safe  deposit  department,  224. 

Rent  —  bill,  175,  179;  collection  of,  175,  177; 
credit  slip,  179 ;  insurance,  181 ;  ledger, 
177,  178  ;  lists,  174 ;  of  safes,  210 ;  receipt 
for,  of  safes,  213,  214. 

Rentals  —  safe  deposit  department,  224;  gen- 
eral ledger  account,  239. 

Reorganization  —  depositary  under  plans  of, 
8,  140-142 ;  record,  142. 

Repairs  —  to  real  estate,  173,  174,  181,  186; 
bills  for,  181,  188 ;  charged  to  income, 
261;  checks  for,  181;  inspection  of,  175 ; 
orders  for,  181. 

Reports,  234;  daily  cash,  242;  safe  deposit 
department  comparative  monthly,  224;  to 
state  banking  department,  94,  242,  243 ; 
to  stockholders,  22,  242. 

Requisition,  for  supplies,  265. 

Reserves,  12,  74-76;  required  in  Massachu- 
setts, 17 ;  to  secure  policy  holders,  230. 

Resolution,  giving  access  to  safe  deposit  box, 
218. 

Responsibility  of  trust  companies  as  corpo- 
rate trustees,  6,  113. 

Restaurant,  261-262 ;  itemized  expenses,  109. 

Risks,  insurance,  etc.  not  compatible  with 
trust  business,  6,  12,  94,  232. 

Roller  copier,  251. 

Safe  deposit  department,  n,  109,  209-229; 
comparative  monthly  report,  223,  224;  in- 
dex of  safe  renters,  214;  rentals,  general 
ledger  account,  239. 

Salary,  30,  257;  book,  HI;  checks,  HI; 
payment  of,  37,  in  ;  list,  in. 

Sale  —  power  of,  173;  of  real  estate,  agree- 
ment, 179. 


Sample  books,  supplies,  266. 

Satisfaction,  of  mortage  by  trustee,  117. 

Savings  fund  department,  225-229 ;  deposits, 
general  ledger  account,  237;  item  in  ex- 
pense account,  109. 

Schedules,  of  securities,  141. 

Scratcher  —  for  coupons  paid,  123;  individ- 
ual depositors',  46,  65,  68,  70 ;  individual 
trusts,  199,  200 ;  savings  department,  229. 

Seal,  19. 

Sealing  machine,  126,  251. 

Secretary,  37-39,  249. 

Securities  —  arrangement  of  company's,  97; 
care  of  trust,  153-162;  delivered,  record 
of,  159,  179,  189,  197;  deposit  of,  140, 
212,  213;  held  for  trust  investments,  206; 
index  of,  155-159,  162,  164,  165 ;  index  ofy 
for  sale,  99 ;  maturing,  index  of,  159 ;  mis- 
cellaneous, 157 ;  purchase  and  sale  of,  98, 
99;  received,  record  of,  153,  158,  179,  188, 
197;  record  of  individual  trusts,  189-197; 
for  sale  ledger,  99 ;  worthless,  157,  160. 

Security,  required  of  trustees,  etc.,  2, 149, 151. 

Separation  of  trust  assets  from  company's,  4, 
147,  148. 

Settlement  —  for  mortgage,  167,  170;  paying 
teller's,  53,  55,  56 ;  for  real  estate,  memo- 
randum of,  179;  receiving  teller's,  47,  48 ; 
trust  disbursements,  188 ;  trust  receipts, 
185. 

Shelves,  roller,  161. 

Shortages,  53. 

Signature  index  —  depositors',  62;  savings 
department,  225,  226. 

Sinking  fund  provisions  in  corporation  mort- 
gage, 116. 

Sorting  tray  —  bookkeeper's,  67 ;  for  dividend 
checks,  126;  for  letters,  251. 

Special  deposits,  general  ledger  account,  237. 

Specimen  signature  index,  62,  225,  226. 

Stamps,  postage,  general  ledger  account,  236. 

"Star  entries,"  deposit  and  charge  slips  for, 

73- 

State  regulation  of  trust  companies,  11-13, 
78,  93,  205,  243. 

Statements,  234,  254 ;  of  condition,  22,  94,  242, 
243 ;  of  coupons  paid,  124 ;  individual 
trust  department,  200;  of  trusts  opened 
and  closed,  204. 

Stationery,  263. 

Stenographers,  249-250. 

Stock  —  care  of,  153,  159;  certificates,  104, 
129,  132 ;  delivered  "  by  transfer,"  136 ; 
general  ledger  account,  236;  index,  155- 
157 ;  inventory  sheet  (supplies) ,  263,  264 ; 
jobbing,  139;  ledger,  104,  124,  136-137; 
ledger  (supplies),  265;  listed  in  different 
cities,  138 ;  part  paid,  137 ;  "  placed  to 
order,"  136;  quotations,  80;  register,  129, 
130;  requisition  (supplies),  265;  sheet, 


INDEX 


record  of  individual  trusts,  190,  192; 
transfer,  104, 153 ;  transfer  book,  134-136 ; 
transfer  sheet,  138. 

Stock  exchange  —  collaterals,  82 ;  New  York, 
requirements  for  listing  stocks  or  bonds, 
279;  New  York,  rules  for  delivery,  287. 

Stockholders,  21-23  ;  examination  by,  245, 
246;  index  of,  104,  126;  liability  of,  23; 
meetings,  22;  reports  to,  22,  242;  repre- 
sented by  directors,  24. 

Stockkeeper,  263,  265. 

Stockroom,  265. 

Stop  payment  orders,  57 ;  record  of,  57. 

Subject,  filing  by,  253. 

Substitution  —  of  collateral,  88,  91 ;  power  of, 

133- 

Superintendent  of  building,  259. 
Supplies  —  purchase  and  care  of,  262-266; 

record  of,  received,  265. 
Suretyship,  5,  II,  231,  256. 
Surplus,  19 ;  general  ledger  account,  239. 
Surrender,  of  safe,  214,  215,  224. 
Surrogate's  court,  149. 
Syndicate  —  accounts,    139  ;    commissions, 

146;    correspondence,   253;    manager,  8, 

138-140;  participation  in,  94. 

Tag,  for  valuables  deposited,  222. 

Taxes  —  collateral  inheritance,  149;  general 
ledger  account,  237,  240 ;  payable,  general 
ledger  account,  237,  238,  240 ;  on  real 
estate,  174;  receipts,  168,  169. 

Telephone,  expense  account,  108. 

Teller  —  paying,  51-57,  213,  218;  receiving, 
44-51,  213,  218;  savings  department  pay- 
ing, 229;  trust  department  paying,  185- 
188 ;  trust  department  receiving,  164,  170, 
184-185. 

Temporary  —  certificates,  140 ;  investment 
ledger,  96. 

Tenants,  index  of,  179. 

Ten-point  margin,  81. 

Testamentary  —  letters,  149;  trustee,  9,  150- 

151- 

Time  loans  —  form  of  note,  82,  83;  general 
ledger  account,  235 ;  ledger,  86,  87 ; 
maturity  notice,  86;  rate  of  interest  on, 
92. 

Title  insurance,  5,  n,  167,  230-232;  registra- 
tion, 176. 

Tornado  insurance,  181. 

Torrens  land  transfer  system,  176,  231. 

Transfer  —  binder  corporate  trusts,  122; 
binder  individual  trusts,  197;  book  for 
bonds,  138;  book  for  stock,  104,  134-136; 
books  closed,  105 ;  boxes  for  correspond- 
ence, 255 ;  sheet,  138  ;  of  title  to  real  estate, 
176 ;  of  trust  securities,  153. 

Transfer  agent,  7,  40,  129-138 ;  commissions, 
145;  distinction  between  registrar  and, 


127, 128 ;  dividend  list  prepared  by,  124 ; 
liability,  131. 

Travellers  —  letters  of  credit,  99 ;  checks,  101. 

Treasurer,  36-37,  44. 

Trial  balances  —  individual  depositors',  67; 
general  ledger,  234,  241 ;  individual  trusts, 
200 ;  savings  department,  229. 

Trust  —  cash  book,  189;  funds,  deposited, 
185 ;  funds,  disbursement  of,  185-188 ; 
funds,  receipt  of,  184,  185;  funds,  unin- 
vested, 148,  185,  188,  200,  201,  207;  gen- 
eral cash  book,  203;  general  journal,  203; 
general  ledger,  188,  199,  201-204;  ledger 
individual,  198-200 ;  letters  filed,  254 ;  offi- 
cer, 39-42,  153,  206 ;  papers  filed,  198. 

Trust  companies — advantages  of,  4,  6;  ap- 
proved by  courts,  2 ;  compared  with  banks, 
I,  II,  28,  43;  deposits  in,  3;  deposits  of, 
with  banks,  54 ;  development,  2,  3,  5 ;  dis- 
tribution by  states,  2 ;  failures,  3 ;  first  or- 
ganized, 2 ;  functions,  1-13 ;  liabilities,  2, 
154 ;  method  of  organizing,  14-19 ;  objec- 
tions to,  4,  5 ;  powers,  2,  3 ;  regulation  of, 
as  to  discounting  paper,  78 ;  as  to  invest- 
ments, 93;  by  federal  government,  13;  by 
separate  states,  12;  in  District  of  Colum- 
bia, 13,  232,  269 ;  in  Massachusetts,  12, 16, 
39 ;  responsibility  of,  as  corporate  trustee, 
6 ;  reserves,  74-76. 

Trust  department  —  corporate,  113-146 ;  indi- 
vidual, 147-208 ;  item  in  expense  account 
109;  paying  teller,  185-188;  receiving 
teller,  164,  170,  184-185. 

Trustee  —  accounting  by,  9;  commissions, 
145,  207-208 ;  under  deed,  9,  151 ;  under 
corporation  mortgages  and  trust  deeds,  7, 
39,113-122;  investments,  204-206 ;  under 
will,  9,  150-151. 

"  Trustee  company,"  5. 

Trusts  —  car,  116;  coal,  116;  for  charities, 
151;  collateral,  116;  corporate,  6-8,  113- 
146;  index  of,  197,  254,  individual,  8-n, 
147-208 ;  opened  and  closed,  monthly 
statement  of,  204;  in  perpetuity,  151;  rec- 
ord of  corporate,  117,  122,  128,  135,  144- 
145 ;  record  of  individual,  153,  188-198. 

Typewriting,  249. 

Underwriting  syndicate  —  manager  of,  8, 138- 

140,  145  ;  participation  in,  94. 
Undivided   profits,  general  ledger   account, 

239,  240. 
Uninvested  trust  funds,  148,  185, 188, 199-201, 

207. 

Vacations,  257. 

Valuables  —  delivery  order  for,  222;   deposit 

of,  212,  219-224 ;  receipt  for,  222. 
Vaults  —  safe  deposit,  209 ;  trust,  153,  159. 
Vertical  filing  system,  251-255. 


INDEX 


Vice-President,  35. 

Visitors  to  safe  deposit  department,  record  of, 

222. 

Voucher,  234;  for  expenses,  107;  index,  no; 
record,  107 ;  for  trust  disbursements,  186- 
187 ;  and  voucher  check,  74. 


Watchmen,  258. 

Wills,  148,  21 1 ;  book,  198;  register  of,  149, 

150. 
Withdrawals  —  savings  department,  226, 227 ; 

slip,  227 ;  notice,  226,  227. 


Books  of  High  Reference-Value 

to  Men  of  Financial  Interests 

HAMILTON  —  Savings  and  Saving:  Institutions*  By  JAMES  HENRY 
HAMILTON,  Ph.D.,  formerly  of  Syracuse  University. 

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them."  —  Banker's  Magazine. 

HEPBURN— Contest  for  Sound  Money.  By  A.  BARTON  HEPBURN, 
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KINLEY  — Money:  A  Study  of  the  Theory  of  the  Medium  of 

Exchange*     By  DAVID  KINLEY,  Ph.D. 

The  Citizen's  Library.    Half  leather,  $1.25  net  (postage,  ioc.). 

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NORTON  — Statistical  Studies  in  the  New  York  Money  Market, 

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THE  MACMILLAN  COMPANY 

64-66  FIFTH  AVENUE,  HEW  YORK 


